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Dubai May Launch Dollar Sukuk This Year -Bankers - ASHARQ AL-AWSAT English Archive
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LONDON, (Reuters) – Dubai may launch a dollar-denominated Islamic bond as early as the third quarter of this year after well-received presentations to investors last week, banking sector sources familiar with the roadshow said on Monday.

One source at the arrangers of the roadshow — run by HSBC and Mitsubishi UFJ — declined to confirm whether Dubai might issue a bond later this year.

But a fund manager familiar with the presentations said they had pointed to a 7-10 year sukuk, and a senior fixed income trader said the issue could come in the third quarter.

“The arrangers said the reception was very good, they are talking about a 7-10 year sukuk,” said one European fund manager.

Dubai went on a non-deal roadshow, meeting non-Islamic investors in Switzerland, France, Germany and Britain between June 4-10, in a mixture of presentations and one-to-one meetings, investors said.

The presentations were designed to show Dubai’s general macro-economic outlook, without any specific deal plans, a source at one of the arrangers said.

“There was a very strong reception,” the source added. But pressed on whether a bond deal was in the works, the source declined to comment.

Dubai issued a five-year dollar and dirham two-tranche sukuk in Oct 2009, shortly before state-owned conglomerate Dubai World rocked markets with a standstill request on billions in debt payments.

The Islamic bond has been strengthening after Dubai World announced a well-received restructuring last month. Dubai’s $1.25 billion 5-year tranche was trading at 96 AE046342208= on Monday, giving a yield of 7.48 percent.

A sukuk would likely be offered at more generous pricing than a conventional bond, providing a carrot for investors, fund managers said.

“I reckon there could be an issue sooner than later,” said one fixed income head familiar with Dubai’s presentation.

“Q3 now looks more of a possibility,” he said.

Dubai’s 2010 budget deficit was projected at 6 billion dirhams ($1.63 billion), the government said in January, but Dubai officials were indicating a slightly smaller deficit of $1-1.5 billion, the European fund manager said.

“Dubai could issue $1 billion at least,” he added.

However, issuance may be delayed by Dubai’s need to get a credit rating, a prerequisite for many investors to buy international debt.

The United Arab Emirates has a rating of Aa2 from Moody’s but Dubai does not have its own rating.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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