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MENAFN - Khaleej Times - 26/01/2013

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(MENAFN - Khaleej Times) The Dubai government said on Wednesday that its dual-tranche landmark transaction, which has raised 1.25 billion across a 10-year sukuk and a first-ever 30-year conventional issue, generated an aggregate order book that was 12 times oversubscribed "demonstrating tremendous investor appetite."

Abdulrahman Al Saleh, Director General, Department of Finance, said the overwhelming response to the transaction shows that the investor community has strongly supported the growth model adopted by Dubai Government.

"We have come a long way since 2009 as a credit and investors who have been with us during the tough times are getting the benefit of the support given to us by them. The sukuk offering complements with the vision of His Highness Shaikh Mohammad bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, to establish Dubai as the Global Capital of Islamic finance while the 30-year bond completes the yield curve for Dubai and matches the long-term project requirements of the government," Al Saleh said in a statement.

"The well-planned and swift intra-day execution took advantage of the positive market environment, which led to a quick build of a large and high-quality order book for a 10-year sukuk. This strong early momentum for the sukuk and investor interest in the longer end of the curve, in turn led to the addition of a 30-year tranche on a reverse enquiry basis," the government said in a statement.

Georges Elhedery, HSBC's head of Global Markets, said the numbers speak for themselves. "The tight pricing, tenor and speed of execution demonstrate international investors' confidence in Dubai's credit."

Salman Ansari, regional head of Debt Capital Markets, Middle East, North Africa and Pakistan for Standard Chartered Bank, said the transaction is a resounding success and has set the tone for upcoming issuances from the region.

"With a high quality order book of approximately 15 billion and the fact that the Government of Dubai was able to successfully print its first ever 30-year issue, this transaction is testimony of global investor confidence in the Dubai credit story and its long-term value proposition," said Ansari.

The 750 million 10-year sukuk was priced at a profit rate of 3.875 per cent, while the 500 million 30-year conventional priced at 5.250 per cent coupon. The issuances have set new benchmarks for Dubai with the 10 year re-pricing the existing yield curve, while the 30 year established a new reference point on Dubai's credit curve, as the first ever unrated USD Reg S trade globally. This has now set the stage for other Dubai entities to raise longer-term financing.

These issuances for a part of the updated Trust Certificate Issuance Programme and the Euro Medium Term Note Programme, which were established in October 2009 and April 2008 respectively. Proceeds of the issuances will be used for general budgetary purposes and refinancing.

The dual-tranche issuance was extremely well received globally and generated an extraordinarily large order book with over 380 investors placing orders of over 15 billion. Orders were received from a wide range of high quality fixed income investors, including fund managers, insurance companies, development organisations, sovereign wealth funds and banks from a wide geographic spread across Asia, Europe, the Middle East, and offshore US, the statement issued through The Media Office said.

The 10-year sukuk tranche saw a geographic distribution of 52 per cent to Middle East accounts, 26 per cent to UK accounts, 12 per cent to other European investors, seven per cent to Asia, and an additional three per cent to other geographies. The 30-year bond saw greater interest from European and US investors, with 38 per cent going to the UK, 24 per cent to other European accounts, 22 per cent to US offshore accounts, and four per cent to Asia.

In terms of distribution among types of investors, the 10-year sukuk saw a diverse allocation with 46 per cent to banks, 34 per cent to funds, and 10 per cent to private banks, with an additional 10 per cent going to other types of investor. The 30-year bond saw the majority of the allocation go to Funds (79 per cent), with additional allocations to banks (12 per cent), Private Banks (eight per cent, and other types of investor (one per cent).

The 30-year bond and the 10-year sukuk offering are lower by 1.1 per cent and 2.57 per cent respectively when compared to the previous 10-year sukuk issued by the government in April 2012.


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