By Arif Sharif and Maher Chmaytelli Nov. 9 (Bloomberg) — Dubai’s second half of a $20 billion bond program will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up,” the emirate’s ruler Sheikh Mohammed Bin Rashid Al-Maktoum said. “The second tranche of the bond program will be well received, it will be widely subscribed and will be used directly to meet Dubai’s obligations in the next few years,” Sheikh Mohammed told an investors conference organized by Bank of America Merrill Lynch in Dubai today. Dubai, the second-biggest of seven states that make up the United Arab Emirates, raised $1.93 billion last month from the biggest sale of Islamic bonds in the Gulf Arab region this year. The $1.25 billion dollar-denominated portion of the bond traded at a yield of 6.42 percent today, compared with a 3.85 percent yield investors are seeking for a five-year Abu Dhabi bond. The sheikhdom set up the $20 billion support fund after the global credit crunch hurt its property, finance and tourism industries, leaving companies unable to raise debt as credit markets froze. The first $10 billion was raised by selling five- year bonds to the U.A.E. central bank in February, and some of the money went to property developers like Nakheel PJSC, which is building palm tree-shaped islands off Dubai’s coast. Dubai, Abu Dhabi The second half of Dubai’s bond program would attract “majority government and minority private sector in my opinion,” said Mohammed Alabbar , chairman of Emaar Properties PJSC, and a member of the Dubai Executive Council in an interview with CNN on Oct. 9. The bond may be issued in November, he said. Central Bank Governor Sultan bin Nasser al-Suwaidi said on July 15 that the U.A.E. may buy part of Dubai’s second bond offering. “Meaningful participation by the private sector would be a strong signal for Dubai that investor sentiment has improved,” said Tristan Cooper , a Dubai-based Middle East sovereign analyst at Moody’s Investors Service. “This provides a motivation for the Dubai government to get private investors involved even if it costs more than selling it all to the federal government.” Dubai allowed foreigners to buy property in some parts of the emirate in 2002, sparking a five-year building frenzy. The boom ended after the credit crisis crimped mortgage lending, forcing the emirate to look to Abu Dhabi, the U.A.E.’s capital and holder of 8 percent of global oil reserves, for support. “I assure you that we will be there for each other when we need it,” Sheikh Mohammed said, referring to the relationship between Dubai and Abu Dhabi. “I want to tell these people who nag about Dubai and Abu Dhabi to shut up.” Stocks Gain Dubai stocks extended gains after the ruler’s comments, climbing to the highest in a week. The DFM General Index added 1.4 percent, while Abu Dhabi’s measure rose 0.2 percent. Sheikh Mohammed’s statement “reiterates the strong link between Dubai, a non-oil state, and the important oil state of Abu Dhabi,” said Luis Costa , an emerging market debt strategist at Commerzbank AG in London. “Most investors are raising their expectations of net issuance out of the Middle East in 2010.” Dubai’s government borrowed $10 billion until last year and its state-related companies $70 billion to help diversify its economy. The emirate built a business park for financial service companies – which is home to the regional offices of Goldman Sachs Group Inc., Standard Chartered Plc, and HSBC Holdings Plc – as well as started a stocks, derivatives and energy exchange. The sheikhdom and its state-owned companies have to repay $15.8 billion of bonds and loans maturing this year, $9.2 billion in 2010, $19.8 billion in 2011 and $17.3 billion in the following year, according to a Deutsche Bank AG report in August. The government said yesterday it repaid a $1 billion civil aviation sukuk due Nov. 4. The seizure of credit markets sparked fears Dubai may not be able to refinance debt. Helps Sentiment The ruler’s comments “will help sentiment,” said Fadi Al Said , head of equities at ING Investment Management (Dubai) Ltd. “These strong statements coming from him directly are a clear message based on the success of the last sukuk issue. I think there will be a substantial portion that might get picked up by investors.” Dubai World, the state-owned holding company, is in talks with banks to reschedule at least $12 billion of debt, a person close to the talks said Sept. 14, speaking anonymously because the negotiations are private. Dubai World unit Nakheel must repay a $3.5 billion Islamic bond due at year-end. “Some may believe that Dubai could have acted faster in combating the impact” of the credit crisis, Sheikh Mohammed said. “We preferred to wait rather than rushing because we are keen to ensure strengthening our major enterprises and restructure them in a way that will have the momentum and the strength to cope with the realties of the new economy.” To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net or
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Dubai Ruler Says Bond Will Be `Well Received,’ Tells Critics to `Shut Up’
