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Dubai’s Asia roadshow may signal future debt issue

Emirate likely to issue bonds by year's end-analyst.

August 20, 2010 3:16 by

Dubai will launch a late August roadshow for fixed-income investors in Asia, a government statement said, a move analysts say hints the emirate may issue bonds later this year as it restructures $23.5 billion in debt.

The government says the roadshow, its second in the past three months, follows its strategy for updating investors on its economy, “providing regular updates to both existing and prospective fixed income investors around the world”.

Like the Europe meeting for fixed-income investors, which was held in June, the Asia roadshow is a non-deal one, indicating no immediate bond issue. But analysts suspect that there may be an issue by the end of the year.

“Not now, but sometime this year they (the Dubai government) will want to issue something,” Dmitry Sentchoukov, EM strategist at Commerzbank in London said. “It’s not clear in what shape or form that will be.”

The planned roadshow, organized by HSBC and Mitsubishi UFJ Financial Group, was scheduled to take place on Aug. 26 in Hong Kong and on Aug. 27 in Singapore, the statement said.

The Gulf Arab emirate launched a $6.5 billion bond programme last October, made up of $4 billion worth of euro-denominated medium-term notes and a $2.5 billion Islamic loan. It placed almost $2 billion in five-year Islamic bonds in late October.

Dubai, which has no sovereign rating compared to neighbouring emirate Abu Dhabi, the United Arab Emirate’s seat of power which is rated at Aa2, may face difficulties should it choose to issue debt this year.

“Dubai is likely to face a headwind when they do this because … the investor base which can buy such a high yield in sovereign debt is probably limited. So this would limit the amount it can issue,” Sentchoukov said.

Dubai’s financial troubles shut international debt markets to primary issuers from the region for months, but several firms, notably Saudi ones, have tapped the market this year. Despite the uptick in issuance, pricing remains a worry.

In April, Dubai utility DEWA raised $1 billion in an issue that offered a coupon of 8.5 percent.

The Dubai finance ministry’s 2014 Islamic bond was off 0.35 points to a mid-point of 94.6, with a yield of 7.86 percent.

The emirate is grappling with the debt restructuring of its core state-linked firms in the wake of a multi-year boom that abruptly ended in the collapse of its property market.

Last year, Dubai stunned global markets with news it would delay debt payments linked to its flagship conglomerate Dubai World The firm said in May it had reached a deal in principle to restructure $23.5 billion with core bank creditors.

(Reporting by Erika Solomon; Editing by Sharon Lindores)

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