The government of Dubai on Wednesday sold $1.25 in dollar-denominated bonds and 2.5 billion dirhams worth of Islamic bonds, or sukuks, at par in a two-tranche, five-year debt offer, according to a fund manager's term sheet.
The dollar tranche carries a coupon of 6.396% and yields 406 basis points over comparable Treasurys. The dirham-denominated portion of the sukuk has a coupon of 370 basis points over the three-month Emirate interbank offered rate.
The total value of the offer, around $1.93 billion, is lower than the market had previously anticipated.
With its economy hit by a sharp downturn in real estate, Dubai needs to raise new funds to help pay existing debt, which combined with the borrowings of its corporate proxies is said to exceed $80 billion. The country becomes the latest sovereign entity from the developing world to tap international capital markets in a bid to seize lowered risk premiums for issuers.
Dubai Islamic Bank, Mitsubishi UFJ, Standard Chartered and UBS AG are acting as lead managers on the transaction.
Terms were as follows:
Amount: $1.25 billion
Maturity: Nov. 3, 2014
Coupon: 6.396% (Midswaps plus 370 basis points)
Price: Par
Spread: 406 basis points over Treasurys
Amount: AED2.5 billion ($681 million)
Maturity: Nov. 3, 2014
Coupon: 370 bps over 3-month Emirate interbank rate.
Price: Par
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