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Dubai Government Bonds

Monday 17 December 2018 (UAE)   
 
   
 

Dubai Government Bonds

Dubai Government Bonds, debt, loans, yield, bond issue information. Dubai bond market prices and how to buy Dubai bonds. The Dubai Government, like many other governments, organisations, and corporate entities, occasionally borrows money by issuing bonds to the financial market. Dubai does this through the Department of Finance (DOF), additionally, other Dubai Government departments and Dubai Government owned companies and organisations may issue their own bonds, for example Dubai Electricity and Water Department (DEWA), Emirates Airlines, Dubai World, Nakheel, Dubai Holding are some of the more well known entities that have borrowed money from the financial markets.

  • Bonds usually have a fixed term of several years, and regular coupon (or interest) payments to the bondholders, at a rate called the yield.
  • When a bond matures, the original sum is paid back to the lender (the bondholder), along with a final coupon payment, and sometimes an additional payment.
  • Defaulting on a bond (meaning the borrower does not pay the money back), or a delay in payment, is usually seen as very negative by the financial markets. The result is that governments find it very difficult to borrow money again in the near future but even financial people have short memories.
  • The Dubai Government did not default or delay any bond payments during the 2008-2009 financial crisis, however, Dubai World and Nakheel, which are both owned by the Dubai Government, came alarmingly close to default, shaking up investors and stakeholders in Dubai. Abu Dhabi bailed out Dubai to the tune of $10 or $20 billion (depending on how you view the figures reported) in 2009 via a Dubai Government bond issue. Dubai World restructured its debt repayments in 2010, which was seen as a partial default in action, if not by name, by many observers.
Dubai government debt and bonds in 2010-2011
  • Dubai government debt repayments due in 2011 are not "significant," according to Abdulrahman Al Saleh, Director General of the Dubai Department of Finance in an interview with Bloomberg (14 December 2010). Bloomberg also reported that the Dubai government will not sell bonds this year but possibly next year to finance its budget.
  • Dubai government debt is $30 billion in late 2010 according to Mohammed Ibrahim Al Shaibani, Director General of the Dubai Ruler's Court.
Types of Dubai government bonds
  • Notes - another name for a bond
  • Sukuk - an Islamic, or Sharia-compliant bond. Instead of interest payments (which are regarded as Haram, or forbidden, in Islam by many), the borrower pays a "profit-rate"
List of Dubai government bonds prices, yields, and other information
  • September 2010 - $500 million 5-year bond with 6.70% coupon (interest rate) (EMTN notes?)
  • September 2010 - $750 million 7-year bond with a 7.75% coupon (EMTN notes?)
  • October 2009 - Dubai Department of Finance borrowed $1.93 billion by issuing 5-year Islamic bonds or notes, maturity date 2014, profit rate 6.396%?
  • October 2009 - Dubai established a $2.5 billion Islamic medium-term note program.
  • October 2009 - Dubai established a $4 billion regular bond program.
  • February 2009 - $10 billion bond fully subscribed to by the UAE Central Bank as part of the Dubai bailout funds?
Dubai bond announced September 2010
  • 29 September 2010 - an updated Bloomberg report said the bond would be $1.25 billion in 2 tranches according to bankers "declining to be identified because the information hasn't been made public":
    • A 5-year $500-million issue with 6.7% yield
    • A 10-year $750-million note with 7.75% yield
  • According to the same report, joint lead managers for the bond are Deutsche Bank AG, HSBC Holdings PLC, and Standard Chartered PLC, and the money would be used for the Dubai government budget.
  • 28 September 2010 - Bloomberg reported that the Dubai government might issue a $1 billion bond in two parts - a 5-year $500 million tranche with a 6.75% yield, and a 10-year $500 million tranche with a 7.875% yield "according to the people with knowledge of transaction ... declining to be identified because the information hasn't been made public" (but Bloomberg didn't say if that meant the tea-boy or someone higher up).
Other large Dubai bonds (> AED 1 billion)
  • October 2010 - DEWA $2 billion bond (part of the $3bn global medium-term note program, rated 'BBB-' by Fitch)
    • 11 October 2010 - start date of DEWA roadshow to sell bonds
    • Arranged by Citi Bank, Credit Agricole, CIB, National Bank of Abu Dhabi (NBAD), Standard Chartered Bank, and Royal Bank of Scotland (RBS). Locations are Boston, London, New York (Reuters 07 October 2010).
    • 13 October 2010 - Reuters reported bond will be in 2 tranches of 6 years and 10 years duration, each of size at least $500 million according to an unnamed source. Bond pricing will be determined on 14 October 2010.
    • 14 October 2010 - $2 billion of notes sold in 2 tranches - $500 million 6-year notes with yield of 522.1 basis points over similar U.S. Treasuries (coupon and yield 6.375%, settlement date 21 October 2010, semi-annual coupon payment, maturity date 21 October 2016), and $1.5 billion of 10-year notes with yield 493.2 basis points over U.S. Treasuries (coupon and yield 7.375%, settlement date 21 October 2010, semi-annual coupon payment, maturity date 21 October 2020). Fitch rating BBB-, Moody's rating Ba2, no S&P rating (Reuters 14 October 2010).
    • 16 October 2010 - demand for the DEWA bond was in excess of $13 billion according to a DEWA statement, lower than the $17 billion worth of demand according to the lead managers reported on 14 October 2010. Proceeds of the bond will be used for DEWA capital expenditure and investment (Reuters 14 & 16 October 2010).
    • 20 October 2010 - Fitch Ratings assigns 'BBB-' to DEWA $500m and $1.5bn notes (press release).
  • September 2010 - Emaar Properties $500 million Convertible Notes due 2015 through Emaar's subsidiary Pyrus in Cayman Islands, established to issue the bond and lend the money to Emaar. Emaar is partly owned by the Dubai Government, and publicly listed on the DFM stock market.
    • Coupon 7.5%. Originally $375m (29 Sep 2010), then $450m, then $500m (07 October 2010) final offering size announced 07 October 2010.
    • Settlement date expected to be around 20 December 2010.
    • Application to be made for Notes (bond) to be listed on the Luxembourg Stock Exchange and to be admitted to trading on the Euro MTF market.
    • Notes to be convertible to Emaar shares at the option of the bondholder. Details still to be announced? Nomura Research estimated 290-385 million shares ($375-500m bond) to be issued if fully converted at a 25% premium (29 Sep 2010).
    • Notes to be issued subject to shareholder approval at an extraordinary general meeting (EGM) date around 03 November 2010 (or 08 November 2010, or 09 December 2010 if no quorum)
    • Joint bookrunners are J.P. Morgan, Royal Bank of Scotland, and Standard Chartered Bank.
    • Standard & Poor's credit rating for Emaar unchanged at BB/Negative.
  • April 2010 - DEWA Sukuk (Islamic bond) - $1 billion 5-year bond with an 8.5% yield, rated BBB- by Fitch
How to buy Dubai bonds
  • Generally for members of the public, it's not as simple as knocking on the door of the Dubai Government Department of Finance with a suitcase of money to exchange for a bond.
  • Bonds are usually issued to banks and other corporate organisations. Individuals could contact their investment adviser or bank to see if there is a way to lend money to the Dubai government via a bond issue but it's only likely to be very indirectly.
  • Some bonds are traded on financial exchanges and stock markets. The Dubai Financial Market (DFM) for example has the following bonds listed:
Headings
  • Dubai bond
  • Dubai bonds
  • Dubai bond prices
  • Dubai bond market
  • Dubai government bond
  • Dubai government bonds
  • Dubai government bond yield
  • How to buy Dubai bonds
Other UAE bond issues
  • Etisalat (Abu Dhabi) - $7 billion Global Medium Term Note (GMTN) program and $1 billion Sukuk program (11 November 2010 announcement?).
Last update Saturday 07-Dec-2013. Page development 1H 2T 3D 4L 5C.
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