Dubai World: A light at the end of the tunnel
The saga continues, but the beleaguered company’s Thursday meeting with creditors could herald a positive new phase for the both the UAE economy and the whole region.
July 22, 2010 1:36 by Reuters
Analysts say much of Dubai’s debt is in the hands of Gulf investors and these are the investors who most need convincing that it is safe once more to buy Dubai debt.
Upcoming Dubai debt maturities account for 50 percent of GCC debt redemptions, according to research firm Arabia Monitor. Of that debt, 45 percent is held domestically by local and foreign banks.
“Those who want exposure to the Middle East but want to minimise the level of risk they are taking will typically buy Qatari or Abu Dhabi credits,” said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi. “However, those looking for higher yields are getting back into selected Dubai credits.”
A Dubai entity, utility DEWA, raised $1 billion in April, with an order book that was 11 times oversubscribed, and Dubai ran a non-deal road show last month, prompting speculation of a dollar-denominated Islamic bond this year.
Dewa and global ports operator DP World are among Dubai credits seen as lower risk.
The Gulf countries will also have to win back investors who have delved further into the MENA – Middle East and North Africa – region. Egypt, Turkey and even Jordan, which is planning a debut Eurobond later this month, have attracted interest as they are seen as insulated from the sovereign debt crisis affecting both Dubai and the euro zone.
Egyptian CDS and Turkish CDS are trading far below Dubai, at 225 bps and 175 bps respectively.
“Investors are being selective,” said Broby. “I have noticed a preference for Turkey as a sovereign and we certainly have bought into local Egyptian paper.”
(By Carolyn Cohn and Rachna Uppal)
(Editing by Patrick Graham.)