x Abu Dhabi, UAESunday 21 January 2018

Dubai prepares to dip back into credit markets

Dubai returns to bond markets as the Middle East's unrest eases, with investors predicting strong demand.

The size and type of the issuance is still unknown. Satish Kumar / The National
The size and type of the issuance is still unknown. Satish Kumar / The National

Dubai is returning to credit markets with a benchmark dollar bond issuance, becoming the first Gulf sovereign to approach debt markets since unrest toppled governments in the Middle East and North Africa region this year.

The emirate's Department of Finance has appointed UBS, Royal Bank of Scotland and Emirates NBD for the issuance, according to sources with knowledge of the matter.

The size and type of the issuance is still unknown, with details expected to be released next week.

The issuance would be the first sovereign bond to come from the Gulf since the onset of the region's uprisings, which have had a chilling effect on issuances of Middle Eastern debt. However, bond investors said Dubai would find ample demand from creditors, given the level of activity on its markets following the turmoil.

"This is a good time to come into the market," said Sapnesh Varma, the head of bond trading at Abu Dhabi Commercial Bank.

"After the unrest, Dubai has performed the best out of Abu Dhabi, Qatar and Bahrain."

High levels of market liquidity locally and improving credit conditions elsewhere in the world would also be in the emirate's favour, he said.

The proposed issuance comes as some of Dubai's prize assets also successfully refinance their debts.

Emirates Airline recently returned to bond markets with a US$1 billion (Dh3.67bn) bond issuance, while Investment Corporation of Dubai, the Government holding unit that owns Emirates NBD and Dubai Aluminium, is also said to have successfully refinanced an upcoming $3.75bn term loan.

Dubai is not rated by any credit ratings agencies, which usually results in higher borrowing costs.

The issuance would be Dubai's second since financial worries surfaced at the emirate's government-owned corporations, and follows a $1.25bn bond successfully issued last September.

Dubai's credit default swaps, which act as insurance against default and are viewed as reflecting the likelihood of an issuer to default on a payment, have recently fallen to their lowest levels since Dubai World requested a standstill on its debts in November 2009.