Dubai's government-related companies are doing everything in their power to pay down debt and reassure investors as global markets stutter and the euro zone mulls its next move.
Emirates Airline became the latest in a string of Dubai companies to announce it had repaid in full a sukuk with the payment of a US$550 million (Dh2.02 billion) bond at maturity this week.
The carrier's repayment will ensure continued access to Islamic credit markets, keeping a vital source of funding open while European markets remain troubled, said Sheikh Ahmed bin Saeed Al Maktoum, the airline's chairman.
"The repayment of our first-ever sukuk bond is part of Emirates' varied financing strategy and reflects our robust financial position," he said. "With the euro-zone debt crisis ongoing it is likely that Islamic financing, with its large pool of liquidity, will play an increasingly important role for us moving forward."
Dubai's improving fortunes and its efforts to reassure markets are a marked contrast from the troubles the emirate's government-related holding companies had battled since 2009, when Dubai World embarked upon a $24.9bn debt restructuring.
The decline of the emirate's property sector had left the balance sheets of local banks with large amounts of bad debt, making it much more difficult for lenders to tap bank financing.
But companies including DIFC Investments and Jebel Ali Free Zone have touted recent successful refinancings, viewed as being among the most tricky Dubai would face this year.
The improved access to credit reflected an improvement in the underlying strength of the UAE economy, said Mohieddine Kronfol, the chief investment officer for fixed income at Franklin Templeton Middle East.
"Dubai's successful refinancings and recent positive engagement with debt capital markets highlight both the progress made in restructuring Dubai and Abu Dhabi's real estate and investment portfolios as well as the UAE banking system's improved liquidity and operating metrics," he said. "Our outlook for UAE credit remains constructive and we expect additional issuance and new companies to issue bonds or sukuk this year."
The region is in the midst of a bonanza of debt-market activity, as a pipeline of new bond sales - which had become jammed because of investor flight during the Arab Spring last year - starts to flow again.
With $18.2bn of bond sales across the Arabian Gulf, the first half of the year has already seen the highest number of issuances since the same period in 2009, when companies raised $15.1bn, according to data from Bloomberg.
The three companies that had expected to struggle most with debt repayments this year have now all successfully refinanced their bonds, averting a fresh bout of debt worries for the emirate.
First was Dubai Holding Commercial Operations Group, which repaid a $500m bond in full in January.
On Wednesday, DIFC Investments repaid a $1.25bn sukuk in full, after securing bank financing worth $1.03bn. Last week, Jebel Ali Free Zone Authorityrefinanced a $2bn sukuk with the sale of a $650m sukuk due in 2019 and an additional Dh4bn of bank financing.
However, not everything in the garden is rosy on the debt-repayment front.
Substantial doubts remain in credit markets over Dana Gas, an energy company based in Sharjah that must meet a debt deadline in October for its $1bn sukuk.
The expectation was that the bond would ultimately be restructured, said Aliasgar Tambawala, a fixed-income investment manager at Mashreq Capital. "They don't have the resources or they're not in a position to raise the resources," he told Bloomberg News.
Dana's chief executive, Ahmed Al Arbeed, plans to retire a month before the sukuk matures, while the company's chairman stood down this month.
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