Emirates NBD expects to raise $100m
Emirates NBD to raise $100m for new Islamic bond
Dubai: Emirates NBD PJSC, the UAE's biggest bank by assets, expects to raise as much as $100 million (Dh367 million) for its new Islamic bond and aims for annualised returns of 12 per cent over four years.
The Emirates Sukuk Fund No 1 Ltd will seek to take advantage of the high yields currently available in Islamic bonds because of the global financial crisis, the bank said in a statement on Tuesday. The fund will be managed by Emirates Investment Services Ltd, the bank's asset-management unit, and will be EIS's 14th offering.
"The market is in distress and we think this particular asset class offers a great opportunity for investors," Deon Vernooy, senior executive officer at EIS, said at a news conference in Dubai on Tuesday.
"We would be disappointed if we don't raise between $50 million to $100 million" for the close-ended fund, he added.
The average yield on Islamic bonds has jumped after the onset of the global credit crisis as investors are pricing in a greater risk of default. Average yields on sukuk, or Islamic debt, rose last month to a record 11.91 percentage points more than the London interbank offered rate, or Libor, compared with 1.99 percentage points in February 2008, according to the HSBC Nasdaq Dubai US dollar Sukuk Index. The spread narrowed to 11.02 percentage points on Tuesday.
The Emirates sukuk fund will invest in seven to eight bonds, including those of the Dubai-owned Jebel Ali Free Zone Authority, Aldar Properties PJSC, Abu Dhabi's second-biggest real-estate developer by market value, and Abu Dhabi Islamic Bank PJSC, the UAE's second-biggest bank complying with Muslim banking rules.
Sales of Sharia-compliant debt, which financed Dubai's real-estate boom over the past decade, fell to $13.6 billion last year from a record $30.8 billion in 2007, according to data compiled by Bloomberg.
The market for Islamic debt had doubled each year since 2004 and was estimated at about $100 billion in the middle of 2008, Emirates NBD said Tuesday, citing figures from the International Monetary Fund.
