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DEWA issues $1bn bond

The first bond issue since the emergence of the debt crisis in Dubai is expected to bolster investor sentiment.

April 16, 2010 9:36 by



Dubai Electricity and Water Authority (DEWA) has placed a $1 billion, five-year bond, two sources from the arranging banks said, the first bond from Dubai since its debt troubles emerged.

The bond will pay a coupon of 8.5 percent, the sources said.

“It is important in terms of reopening the debt capital markets for Dubai,” said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi.

Gulf firms have found it difficult to tap the debt market ever since state-owned conglomerate Dubai World announced in November that it needed to delay repayment on $26 billion in debt.

However, the government’s restructuring plan for Dubai World last month has opened the door again for state-linked issuers.

“(DEWA’s) success will provide a further catalyst for investor sentiment toward the Dubai credit story,” Bhogaita added.

The final terms of the issue – which is open to qualified institutional investors in the US – was confirmed by two bankers from two of the lead banks on the issue and two market sources.

DEWA saw strong investor interest for the dollar bond, allowing it to cut the yield to 8.5 percent, the bottom of the guidance range of 8.5-8.625 percent.

“The bond was issued at a premium of 595 basis points to US Treasuries, which is very generous,” said a London-based banker. “The expectation from the market was that DEWA would have to pay a premium to get the deal done.”

The book for the benchmark bond stood at over $11 billion, one of the sources said. The utility is rated Ba2 by Moody’s and BBB- by Fitch Ratings.

“I do not think they (DEWA) would have been able to do anything like this three months ago,” said Dmitry Sentchoukov, EM strategist at Commerzbank in London.

“It shows the market believes that the problems of a few government-owned enterprises are localized and there will be a low chance of spillover,” he said.

State-owned DEWA had been looking since last year to tap the bond market to fund projects but held off as investors grew wary of Dubai’s credit risk.

Gulf fixed-income markets were largely shut for months, but are now slowly coming back to life with a series of issues already priced or in the pipeline.

Strategists said increasing optimism over emerging markets helped DEWA to place its debt, while the launch showed the market was now open again for at least some issuers from Dubai.

“Strong standalone names or banks perceived to be covered by the federal umbrella, such as Emirates Bank, will be able to tap markets, but it’s unclear if they will be willing to pay up in order to issue,” said Okan Akin, corporate debt strategist at RBS in London.

In a similar deal, Ukraine’s state-run Ukreximbank has launched a $500 million bond at 8.375 percent on Thursday, the first by a Ukrainian entity since state-controlled energy firm Naftogaz was forced to restructure its debt last year.

In the United Arab Emirates, National Bank of Abu Dhabi (NBAD), the Gulf oil producer’s largest lender by market capitalization, raised $750 million from a five-year bond in March, which was largely oversubscribed.

Pricing on the much higher-rated NBAD paper was about half of what DEWA investors are getting.

Costs to insure Dubai’s five-year debt stood at 414.7 basis points on Thursday, compared with Wednesday’s close of 413.7 points and 441 points a month ago, according to data provider CMA DataVision.

Citi, Standard Chartered, Royal Bank of Scotland and National Bank of Abu Dhabi were the joint lead managers on the DEWA issue.

Dubai Electricity and Water Authority (DEWA) has placed a $1 billion, five-year bond, two sources from the arranging banks said, the first bond from Dubai since its debt troubles emerged.

The bond will pay a coupon of 8.5 percent, the sources said.

“It is important in terms of reopening the debt capital markets for Dubai,” said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi.

Gulf firms have found it difficult to tap the debt market ever since state-owned conglomerate Dubai World announced in November that it needed to delay repayment on $26 billion in debt.

However, the government’s restructuring plan for Dubai World last month has opened the door again for state-linked issuers.

“(DEWA’s) success will provide a further catalyst for investor sentiment toward the Dubai credit story,” Bhogaita added.

The final terms of the issue – which is open to qualified institutional investors in the US – was confirmed by two bankers from two of the lead banks on the issue and two market sources.

DEWA saw strong investor interest for the dollar bond, allowing it to cut the yield to 8.5 percent, the bottom of the guidance range of 8.5-8.625 percent.

“The bond was issued at a premium of 595 basis points to US Treasuries, which is very generous,” said a London-based banker. “The expectation from the market was that DEWA would have to pay a premium to get the deal done.”

The book for the benchmark bond stood at over $11 billion, one of the sources said. The utility is rated Ba2 by Moody’s and BBB- by Fitch Ratings.

“I do not think they (DEWA) would have been able to do anything like this three months ago,” said Dmitry Sentchoukov, EM strategist at Commerzbank in London.

“It shows the market believes that the problems of a few government-owned enterprises are localized and there will be a low chance of spillover,” he said.

State-owned DEWA had been looking since last year to tap the bond market to fund projects but held off as investors grew wary of Dubai’s credit risk.

Gulf fixed-income markets were largely shut for months, but are now slowly coming back to life with a series of issues already priced or in the pipeline.

Strategists said increasing optimism over emerging markets helped DEWA to place its debt, while the launch showed the market was now open again for at least some issuers from Dubai.

“Strong standalone names or banks perceived to be covered by the federal umbrella, such as Emirates Bank, will be able to tap markets, but it’s unclear if they will be willing to pay up in order to issue,” said Okan Akin, corporate debt strategist at RBS in London.

In a similar deal, Ukraine’s state-run Ukreximbank has launched a $500 million bond at 8.375 percent on Thursday, the first by a Ukrainian entity since state-controlled energy firm Naftogaz was forced to restructure its debt last year.

In the United Arab Emirates, National Bank of Abu Dhabi (NBAD), the Gulf oil producer’s largest lender by market capitalization, raised $750 million from a five-year bond in March, which was largely oversubscribed.

Pricing on the much higher-rated NBAD paper was about half of what DEWA investors are getting.

Costs to insure Dubai’s five-year debt stood at 414.7 basis points on Thursday, compared with Wednesday’s close of 413.7 points and 441 points a month ago, according to data provider CMA DataVision.

Citi, Standard Chartered, Royal Bank of Scotland and National Bank of Abu Dhabi were the joint lead managers on the DEWA issue.

Dubai Electricity and Water Authority (DEWA) has placed a $1 billion, five-year bond, two sources from the arranging banks said, the first bond from Dubai since its debt troubles emerged.

The bond will pay a coupon of 8.5 percent, the sources said.

“It is important in terms of reopening the debt capital markets for Dubai,” said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi.

Gulf firms have found it difficult to tap the debt market ever since state-owned conglomerate Dubai World announced in November that it needed to delay repayment on $26 billion in debt.

However, the government’s restructuring plan for Dubai World last month has opened the door again for state-linked issuers.

“(DEWA’s) success will provide a further catalyst for investor sentiment toward the Dubai credit story,” Bhogaita added.

The final terms of the issue – which is open to qualified institutional investors in the US – was confirmed by two bankers from two of the lead banks on the issue and two market sources.

DEWA saw strong investor interest for the dollar bond, allowing it to cut the yield to 8.5 percent, the bottom of the guidance range of 8.5-8.625 percent.

“The bond was issued at a premium of 595 basis points to US Treasuries, which is very generous,” said a London-based banker. “The expectation from the market was that DEWA would have to pay a premium to get the deal done.”

The book for the benchmark bond stood at over $11 billion, one of the sources said. The utility is rated Ba2 by Moody’s and BBB- by Fitch Ratings.

“I do not think they (DEWA) would have been able to do anything like this three months ago,” said Dmitry Sentchoukov, EM strategist at Commerzbank in London.

“It shows the market believes that the problems of a few government-owned enterprises are localized and there will be a low chance of spillover,” he said.

State-owned DEWA had been looking since last year to tap the bond market to fund projects but held off as investors grew wary of Dubai’s credit risk.

Gulf fixed-income markets were largely shut for months, but are now slowly coming back to life with a series of issues already priced or in the pipeline.

Strategists said increasing optimism over emerging markets helped DEWA to place its debt, while the launch showed the market was now open again for at least some issuers from Dubai.

“Strong standalone names or banks perceived to be covered by the federal umbrella, such as Emirates Bank, will be able to tap markets, but it’s unclear if they will be willing to pay up in order to issue,” said Okan Akin, corporate debt strategist at RBS in London.

In a similar deal, Ukraine’s state-run Ukreximbank has launched a $500 million bond at 8.375 percent on Thursday, the first by a Ukrainian entity since state-controlled energy firm Naftogaz was forced to restructure its debt last year.

In the United Arab Emirates, National Bank of Abu Dhabi (NBAD), the Gulf oil producer’s largest lender by market capitalization, raised $750 million from a five-year bond in March, which was largely oversubscribed.

Pricing on the much higher-rated NBAD paper was about half of what DEWA investors are getting.

Costs to insure Dubai’s five-year debt stood at 414.7 basis points on Thursday, compared with Wednesday’s close of 413.7 points and 441 points a month ago, according to data provider CMA DataVision.

Citi, Standard Chartered, Royal Bank of Scotland and National Bank of Abu Dhabi were the joint lead managers on the DEWA issue.

Arabnews



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