Dubai Investments PJSC, whose cash holdings tumbled during an economic slump, may need to pay higher yields than government bonds to attract investors to an Islamic debt sale on concern it may struggle to repay the sukuk.
The Dubai-based company with stakes in more than 40 businesses from real estate to glass production is considering selling bonds that comply with Islam’s ban on paying interest, Chief Executive Officer Khalid bin Kalban said in a March 7 interview. The unrated company will have to offer at least 5 per cent on a five-year sukuk, according to SJS Markets Ltd. That’s 61 basis points more than yields on Dubai’s Shariah- compliant notes due November 2014.
Many of Dubai Investments’ businesses suffered when the sheikhdom’s real-estate market crashed on the heels of the 2008 global credit crisis, sending home prices plunging more than 60 per cent from a peak that year. The company’s cash holdings dropped 71 per cent between 2008 and 2010 to Dh399 million ($109m) and profit fell for a third year in 2011.
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