Emirates May Repay $500 Million Bond if Refinancing Deal Is Unattractive

Emirates will repay a $500 million bond due in March if it doesn’t get “attractive” terms in a refinancing deal because the biggest Arab airline is sitting on $3.4 billion of cash, President Gary Chapman said.

The bonds were priced at 80 basis points more than the London interbank offered rate when they were sold in 2004 and “we won’t be able to get that sort of financing, the way the world markets are,” Chapman said in an interview in Dubai. “We are not going to be under any pressure to refinance if we decide that the terms are not attractive enough.”

Emirates raised the money to fund working capital and the Dubai government-owned company may consider issuing five-year notes later this year, Chapman said. HSBC Holdings Plc advised Emirates on the 2004 note issue.

Borrowing costs for the Dubai’s state-owned companies have risen since the global credit crisis dried up debt markets and Dubai World said it planned to restructure $24.8 billion of debt. Dubai Electricity and Water Authority raised $1 billion in April by selling five-year dollar-denominated bonds that yield 8.5 percent.

Emirates will receive eight new planes this year from an order book of 145 and “getting aircraft financing has been the least of our problems,” Chapman said. “We have offers from 17 different institutions and some of them are already mandated.”

Emirates today reported a more than four-fold rise in annual profit to $964 million as it flew more passengers, cut costs and paid less for fuel.

To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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