Emirates Airline has defied investors' worries over Dubai's creditworthiness when its national flag carrier secured US$413.7 million (Dh1.51 billion) in fresh funds for three new Boeing 777 aeroplanes. The 12-year bond is secured by the Export-Import Bank of the US and is the first such deal backed by a US agency. Because the bank enjoys a high credit rating, it gives Emirates access to cheaper financing. The notes carry a fixed 3.465 per cent coupon. "This is a very good example of Dubai Government-owned companies thinking strategically and creatively about their financing," said Mohieddine Kronfol, the managing director of Algebra Capital. "They are starting to explore all avenues available to them, whether that is domestic or international." Dubai and its Government-owned entities have amassed an estimated $85bn in debt and investors have grown increasingly worried over the emirate's ability to repay. Although most of the loans were meant for long-term financing, they were taken out for the short term under the assumption of being refinanced every couple of years. "This structure will go a long way in bridging the funding gap which is evidently present in these difficult market conditions," said Brian Jeffery, the senior vice president, corporate treasury, at Emirates. "We believe bond markets represent an important source of capital for the airline industry in general and for Emirates in particular." On December 14, the emirate must repay about $4bn for its Nakheel sukuk, which is widely seen as the litmus test of Dubai's ability to repay investors. The deal follows earlier issues by Etihad Airways and the Dubai Electricity and Water Authority (DEWA), which have also been backed by credit agencies. Two weeks ago Etihad Airways signed $1bn in loan guarantees from the OECD. A recent 13-year $1bn DEWA financing deal was also backed by several European export credit agencies and was the first major export agency-backed financing for a UAE sovereign. According to bankers, several Government-owned companies have started to hold talks about issuing new bonds. Emirates had widely been considered one likely candidate, along with DEWA, Emirates National Oil Company and the Road and Transport Authority. Emirates airline has been hit by falling business travel and cargo volumes and rising costs have squeezed the airline's cash flow, analysts said. The company previously issued unrated bonds. Goldman Sachs and Calyon Securities structured the deal and were the joint bookrunners.
@Email:uharnischfeger@thenational.ae
