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Dubai assets on the line

Dubai assets on the line

Dubai is expected to boost budget revenues through asset sales, according to analysts, who say bond issuance and funds from other Gulf states are also options – ahead of new taxes.

September 13, 2010 2:48 by

Dubai officials met with fixed income investors in Asia last month, seen as a sign a bond issue could be on the cards.

“They could probably do $500 million to a billion, much beyond that will be tricky,” said a fixed income investor. “Asian private bank money is still quite hungry for yield. A seven-year piece of Dubai paper with a nice yield to it would probably do quite well.”

The government’s utility company DEWA attracted $11.5 billion in bids for a $1 billion bond in April but had to pay a generous 1.25 percent premium to the underlying sovereign. The yield on Dubai’s paper maturing in 2014 has come down to 6.8 percent from a high of 10 percent in February.

Alternatively, Dubai may have to approach neighbours like Saudi Arabia and Qatar with a debt issue. Abu Dhabi would only be on hand again in the worst-case scenario, analysts say.

“Maybe $500 million each from Saudi, Kuwait and Qatar would not really move the needle (there),” the fixed-income investor said.

Analysts, however, say that could carry risks, making asset sales and bond issues the more likely way forward.

“Does Dubai want to be seen as a sort of Lebanon that needs to go cup in hand around the region trying to raise concessionary money?” the investor said.

(By Martin Dokoupil. Additional reporting by Martina Fuchs; Editing by Susan Fenton)

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