Bondholders of Dubai Holding Commercial Operations Group, which runs the sail-shaped Burj Al Arab hotel, have made at least twice the returns of peers as investors are drawn to its higher yields amid a tourism revival.
The company's £500 million of notes due in 2017 handed investors 4.2 per cent this year, according to data compiled by Bloomberg. That compares with little change in the average return on United Arab Emirates debt and is least two times more than gains on bonds of developers Emaar Properties and Aldar Properties, the data show.
Investors seeking exposure to Dubai's tourism and property recovery are hunting for higher yields after three state- related companies paid or refinanced $3.75 billion of debt in 2012, improving perceptions of the city's credit risk. Dubai Holding Commercial operates hotels, including the waterfront Burj Al Arab, which have benefited from the fastest economic growth in five years and record passenger traffic through the city's airport.
An average 150 basis-point spread over Emaar and Aldar debt is luring investors, Gus Chehayeb, director of Middle East and North Africa research at investment bank Exotix, said. The company's reliance on the cash-generating hotels, retail centers and leasing "is playing in its favor as tourism flows continue to accelerate and occupancy rates remain at historical highs across the emirate," he said.
* Bloomberg News
