Dubai: Dubai Aviation Corporation said on Thursday its $500 million debut sukuk was oversubscribed over 6 times, indicating strong investor appetite.

The five-year sukuk was priced at a profit rate of 3.776 per cent, equivalent to 200 basis points over the mid-swaps. About 150 investors placed orders worth $3 billion.

The proceeds will be used for general corporate purposes and refinancing.

“The high-quality and diversified order book enabled flydubai to price the transaction at a very tight spread, after two price revisions,” the company said.

About 64 per cent of the orders for the sukuk came from investors in the Middle East, while 25 per cent of the orders came from European accounts, indicating diversified order book.

In terms of distribution among types of investors, the sukuk saw a diverse allocation with 65 per cent to banks, 20 per cent to fund managers, and the rest going to private banks and others.

Credit Agricole, Dubai Islamic Bank, Emirates NBD, HSBC, National Bank of Abu Dhabi, Noor Bank and Standard Chartered are the arrangers for the sukuk sale.

Positive:

“It is positive and it reaffirms investors confidence over the ability of Flydubai to gain market share,” said Marwan Shurrab, fund manager and head of trading at Vision Investments & Holdings.

Before this, Dubai’s flagship airline Emirates, which sold $1 billion sukuk in March last year, was the only Gulf carrier to raise funds through bonds or sukuk.

The unlisted airline, which started operations in June 2009, made a net profit of $14 million in the first half of this year, according to Reuters.

Revenue in the period was $515 million, up 17.1 per cent on the same six months of 2013.

Confidence:

“The highly successful offering demonstrates the confidence which international investors place in the Emirate of Dubai and its entities and confirms the access to funding which our corporates enjoy from the Islamic Capital Markets,” said Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of flydubai.

This is a highly successful result that further confirms the credibility of flydubai and the investors’ confidence in the promising outlook for flydubai, and Dubai’s status as a leading global aviation hub, Al Maktoum said.

Aviation and tourism related activities will contribute $53.1 billion or 37.5 per cent to Dubai’s GDP in 2020 and support over 754,500 jobs, according to Oxford Economics Report.

In 2013, Emirates Airline, Dubai Airports and the aviation sector contributed $26.7 billion or 27 per cent to Dubai’s GDP and supported a total of 416,500 jobs.

By 2020, Dubai International is estimated to receive 126.5 million passengers, almost 30 per cent higher than its original 2010 assessments.