Dubai’s government plans to sell five-year dollar and dirham denominated bonds as part of its $6.5 billion medium-term fund-raising plan, according to three investors who have been approached for the sale.
The dollar bonds may be priced to yield 350 basis points to 400 basis points over the benchmark midswap rate, said the investors who didn’t want to be identified because the talks are private. The dirham bonds may be priced to yield in the “high” 300 basis points above the 3-month emirates interbank offered rate, they said.
“This is a pricing sweet spot,” said Norval Loftus, head of sukuk and convertible bonds at Matrix Corporate Capital Ltd. in London, which manages $2.5 billion in assets. “A high 300 basis point spread over swaps is the perfect pricing zone because as an investor you are being compensated very generously for the risks you are taking.”
It’s the first international bond sale from Dubai since June 2008, when Dubai Electricity & Water Authority, the Gulf emirate’s state-run utility known as Dewa, raised $1 billion through a five-year floating rate note by paying 125 basis points above emirates interbank offered rate, Bloomberg data show. One basis point is 0.01 percentage point.END
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