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June 9 (Bloomberg) -- Dubai hired Royal Bank of Scotland Group Plc, UBS AG and Emirates NBD PJSC for a benchmark dollar bond sale, three people familiar with the transaction said, as the emirate seeks to bridge its budget deficit.
Conference calls with investors will begin tomorrow, with one meeting scheduled in London next week, one of the bankers said, declining to be identified because the information is private. A benchmark bond is at least $500 million.
This “is positive news for the market,” Adnan Haider, head of fixed-income and equities at Abu Dhabi Commercial Bank PJSC, said in a phone interview. “I think they are taking advantage of market liquidity and the positive response to recent sales, such as the Emirates bond, and the Dubai World restructuring.”
Dubai government-owned Emirates, the world’s biggest airline by international traffic, on June 1 raised $1 billion from the sale of five-year bonds at a spread of 330 basis points over the benchmark mid-swap rate. The government in January forecast a deficit of 3.78 billion dirhams ($1 billion) for the year compared with 5.99 billion dirhams in 2010.
The cost of insuring Dubai’s debt rose 2.5 basis points today to 321, according to CMA prices for credit-default swaps. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a swap protecting $10 million of debt.
Dubai’s Department of Finance last sold bonds in September, when it raised $1.25 billion in a two-part bond sale in its first sovereign debt issue since the Dubai World debt restructuring. The five-year, $500 million note was priced to yield 6.7 percent, while the $750 million 10-year bond was priced to yield 7.75 percent. The bonds generated more than 370 orders valued at about $5 billion, it said then.
“It is certainly an issuer’s market and there is room for Dubai bonds to rally further given the richness of other bonds” from the Middle East and North Africa region, according to Tarek Elalaily, the London-based director of MENA fixed-income sales at New York-based Cantor Fitzgerald LP.
The yield on Dubai government’s 6.7 percent dollar bond maturing October 2015 climbed 8 basis points, the most since May 23, to 5.26 percent at 4:02 p.m. in Dubai, according composite prices on the Bloomberg.
Dubai, the second-biggest of the seven sheikhdoms that make up the United Arab Emirates, had to seek help from neighboring Abu Dhabi after the global credit crisis pushed property prices down by more than half from their peak in 2008, and frozen credit markets forced some state-owned companies to delay loan payments. State-owned Dubai World signed a final agreement with its creditors in March to restructure about $25 billion of debt.
Dubai has received at least $1 billion in bids for a program to raise financing backed by future road-toll receipts, more than the government’s target of raising $800 million, two bankers familiar with the plan said May 3.
--With assistance from Stefania Bianchi in Dubai. Editors: Shaji Mathew, Riad Hamade
To contact the reporters on this story: Dana El Baltaji in Dubai at firstname.lastname@example.org; Arif Sharif in Dubai at email@example.com
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