Dubai: The Government of Dubai is to issue a benchmark US dollar bond and use the proceeds for "general budgetary purposes", the emirate's Department of Finance said on Monday.
Bankers said earlier this month that Dubai would seek to raise about $1 billion.
The department has mandated Deutsche Bank, HSBC and Standard Chartered Bank as joint lead managers for the bond, which will be issued under its updated Euro Medium Term Note (EMTN) programme set up in April 2008.
The bond "is expected to be launched shortly, subject to market conditions," a Department of Finance statement said.
Good sign
Dr Eckart Woertz, Director of Economic Studies at Gulf Research Centre said: "It is a good sign that appetite for Dubai credit has returned to markets, but they obviously prefer to get a government bond or one with an explicit government guarantee like the Dubai Electricity and Water Authority bond in spring. An implicit government guarantee is not enough anymore."
Roadshows for the offering, the Dubai Government's first since conglomerate Dubai World's debt standstill announcement last year, would begin "in the next few days", a person close to the issuance told Gulf News.
The aggregate direct debt of the Dubai Government was Dh105.47 billion as of July 31, 2010, with various maturities up to 2017, an updated bond prospectus filed with the London Stock Exchange (LSE) shows.
This includes related party debt from the Abu Dhabi Government and the Central Bank of the UAE for the Dubai Financial Support Fund (DFSF) and the restructuring of the Dubai World Group.
Dr Armen V. Papazian, a financial economist and chief executive of Keipr.com business information website said: "This is an important issuance for Dubai. I believe Dubai's restructuring plans and the federal and Central Bank support to the emirate will ensure there is sufficient demand for the issue.
"The foreign debt of Dubai must be serviced and domestic expenditures must be attended to. New borrowings to roll over debt will be an important mechanism alongside asset sales to ease the liquidity needs of the emirate."
The Government of Dubai has offered to recapitalise Dubai World through the equitisation of the $8.9 billion owed by the conglomerate to the DFSF and to commit up to $1.5 billion in new funds.
Under the terms agreed with lenders, Dubai World's post-restructuring financial indebtedness will be approximately $14.4 billion, comprising two tranches.
EMTN programme
In April 2008, the Government of Dubai established an EMTN programme of Dh15 billion. It then issued a Dh4 billion floating rate note at a coupon of three-month Eibor plus 0.5 per cent. It issued another fixed-rate note of Dh2.5 billion at 4.25 per cent. Both have a five-year tenure and mature on April 23, 2013.
The EMTN programme was updated in October 2009, at which time the aggregate nominal value of the notes issuable was increased to $4 billion. The programme was also listed on the London Stock Exchange in addition to the Dubai Financial Market.
