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Dubai poised to issue dual-tranche sukuk

Investors sell off existing positions in anticipation of new issue

Gulf News

Dubai Dubai plans to launch a dual-tranche Islamic bond imminently, the banks arranging the issue said on yesterday, and is expected to attract healthy investor demand.

The five- and ten-year benchmark sukuk is Dubai's first Islamic bond since 2009. Initial guidance was seen around 5 and 6.5 per cent respectively for the two tranches.

Sources told Reuters earlier yesterday that the emirate had mandated four banks — Citigroup, HSBC, National Bank of Abu Dhabi and Dubai Islamic Bank — for a bond that could raise up to $1.5 billion (Dh5.5 billion).

Investors began selling off existing positions on Dubai government debt in anticipation of the new issue.

"Certainly there will be demand for a new issue from Dubai, and the 2017 maturity is a gap in their curve currently," said Thomas Christie, sales trader for fixed income at Rasmala investment bank.

Heavily oversubscribed

Dubai is the latest to take advantage of investor interest in Islamic bonds as the Eurozone debt crisis takes the shine off conventional bonds. Sukuk issues have dominated regional bond sales this year and issues have been heavily oversubscribed.

State-owned Saudi Electricity's $1.75 billion issue in March attracted demand of more than $15 billion.

Dubai last tapped debt markets in 2011 when it issued a $500 million, ten-year bond with a five-year put option, allowing investors to redeem their investment ahead of maturity at full value. That bond was last bid at near 103 levels, according to Thomson Reuters data, to yield 5.2 per cent.

Helped by an economic revival in trade and tourism and its safe-haven status amid the Arab Spring civil uprisings, Dubai has been climbing back from the depths of its debt restructuring.