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Abu Dhabi sees no bond in 2010, Dubai says no comment

Abu Dhabi testing market, may issue later - top official; Dubai finance chief says determined to get credit rating; Says not seeking one at moment, depends on market shape.

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September 26, 2010 12:34 by



Abu Dhabi will not issue sovereign bonds this year, while fellow United Arab Emirate member Dubai is determined to get a credit rating in the future, top government officials said on Sunday.

Both Gulf Arab emirates have been testing investor interest in potential debt issues during recent months, with sources indicating debt-crisis hit Dubai may be first to tap the market.

Last week, two sources told Reuters that Dubai was readying to issue up to $1 billion in bonds as early as this week, the first sovereign placement from the emirate since its debt crisis rattled the markets in November 2009.

However, Department of Finance chief Abdulrahman al-Saleh declined to comment on the potential bond issue on Sunday.

“We decided not to comment on anything (regarding the bond issue) at this moment,” Saleh told Reuters in a brief telephone interview.

The sources said Dubai’s government, which launched a $6.5 billion bond programme last October, is eyeing a maturity of up to seven years for its paper.

Analysts see government debt issues as one of the financing options for Dubai as its state-owned firms sit on more than $100 billion in debt, including some $30 billion in bonds and loans due to mature in 2011-2012.

Saleh also told Reuters Dubai was not seeking a sovereign credit rating at the moment and confirmed his comments to daily Al-Khaleej that the emirate was determined to get one.

When asked whether it was rather likely next year, he said: “We do not know yet. It depends on circumstances and market conditions.”

Dubai had faced heavy criticism from investors over a lack of transparency after it sought to delay hefty debt payments linked to its conglomerate Dubai World last year.

Analysts have said the absence of a credit rating could make it difficult for Dubai to issue debt at a reasonable price.

Obtaining one will improve clarity over its creditworthiness and help broaden a demand base as some investors cannot tap into unrated debt issues. However, a rating would also place the emirate under regular scrutiny.

Dubai clashed with Standard & Poor’s in January, after the agency downgraded and then withdrew its rating on a top government-linked company, DHCOG.

ABU DHABI BONDS

Abu Dhabi, which accounts for 10 percent of the world’s oil reserves and over 60 percent of the UAE economy, has been rated ‘AA’ by Standard and Poor’s and Fitch Ratings. It is seen by many investors as a stronger credit thanks to its oil income.

However, the emirate’s top official reinforced on Sunday a view that there was no immediate issue in the pipeline, saying it may come later than 2010.

“We are testing the market and we have seen that the market is very responsive. We will act accordingly,” Mohammed al-Bawardi, Secretary General at Abu Dhabi’s executive council, told reporters on the sidelines of an energy conference.

Earlier this month, an official at Abu Dhabi’s debt management office told Reuters there would be no sovereign bond issues soon after the government roadshows that took place in several European countries.

Abu Dhabi, which accounts for nearly all oil wealth of the world’s third largest crude exporter, last tapped the markets in April 2009, selling $3 billion worth of sovereign debt.

(By Martin Dokoupil and Mahmoud Habboush. Writing by Martin Dokoupil; Editing by Jason Benham and Louise Heavens)



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