Jafza, DIFC Bond Yields Rise on Refinancing Risk: Arab Credit - Bloomberg

Yields on Islamic bonds of Jebel Ali Free Zone FZE and DIFC Investments LLC, two Dubai government-owned companies, have risen since April as investors shunned risky assets and refinancing prospects worsened.

The extra yield investors demand to hold the floating rate Islamic bond due Nov. 2012 of Jebel Ali Free Zone, a business park, over the Dubai government’s 6.7 percent 2015 bond widened to 443 basis points on Sept. 16 from 316 at the end of the first quarter, according to data compiled by Bloomberg. The spread between the floating rate note maturing June 2012 of DIFC Investments and the sovereign widened to 623 basis points on Sept. 16 from this year’s low of 115 on May 9.

“Over the last four months, you have gone through a general de-risking and names that are a higher credit risk have under-performed,” Abdul Kadir Hussain, chief executive officer at Mashreq Capital DIFC Ltd., said in a phone interview yesterday. The two companies also have sukuk maturing in 2012 and “investors are starting to get a bit concerned about their refinancing capabilities given the market volatility,” he said.

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