Dubai Road-Toll Fund-Raising Plan Said to Get $1 Billion Bids, Tops Target
Dubai received at least $1 billion in bids for a program to raise financing backed by future road-toll receipts, more than the government’s target, said two bankers familiar with the plan.
There was strong interest from international banks, financial institutions and pension funds for the $800 million securitization program, one of the bankers said. The six-year financing may be priced at 3.5 percentage points over the London interbank offered rate, both bankers said. They declined to be identified because the transaction hasn’t been completed yet.
Dubai, the Persian Gulf business hub battling a debt crisis, said April 7 it hired Citigroup Inc. (C), Dubai Islamic Bank PJSC (DIB), Emirates NBD PJSC (EMIRATES) and Commercial Bank of Dubai PSC (CBD) to raise the financing to help fund transport projects. The banks have put up the money for the dual-currency transaction and are offering portions of the securities to other investors. The offer includes both conventional and Islamic portions.
Securitization is a process of issuing new securities backed by loans, mortgages, credit card debt or other assets like future income streams from a road-toll system.
Dubai, the second-biggest of the seven sheikhdoms that make up the United Arab Emirates, had to seek help from neighboring Abu Dhabi after the global credit crisis pushed property prices down by more than half from their peak in 2008, and frozen credit markets forced some state-owned companies to delay loan payments. State-owned Dubai World signed a final agreement with its creditors in March to restructure about $25 billion of debt.
Dubai’s government last sold bonds in September, when it raised $1.25 billion in a two-part bond sale in its first sovereign debt issue since the Dubai World credit crisis roiled global markets in 2009. Its five-year, $500 million note was priced to yield 6.7 percent, while the $750 million 10-year bond was priced to yield 7.75 percent. The bonds generated more than 370 orders valued at about $5 billion, it said then.
To contact the reporters on this story: Arif Sharif in Dubai at firstname.lastname@example.org
To contact the editor responsible for this story: Edward Evans at Eevans3@bloomberg.net