Dubai launched a US$1.25 billion (Dh4.59bn) government bond yesterday, beginning its first round of fund raising since the financial crisis deepened late last year. The emirate's return to international capital markets was followed by word from Emaar Properties that it was also seeking to raise $375 million from a bond sale. Investors and analysts regard the Dubai bond sale as a litmus test for Dubai's recovery from the world's deep economic turmoil.
It also represents the first time Dubai has reached out to international investors since the state-owned Dubai World last November began the process of restructuring $24.9bn of debt. Investors placed bids for more than $5bn of bonds yesterday, four times more than Dubai wanted to raise. Observers said the surge in interest was evidence of confidence in Dubai's recovery despite the recent troubles and proof that investors are beginning to look for higher-yielding debt after a long refuge in safer assets.
"It seems that investors are definitely giving Dubai a strong vote of confidence and rewarding them for some of the painful restructuring they've been able to negotiate during the past nine months," said Mohieddine Kronfol, the managing director of asset management at Algebra Capital in Dubai. "The timing is quite fortunate in that absolute interest rates are low and demand for yield is strong." The Dubai bonds are to be sold in two tranches - one of $500m that matures in five years and another of $750m that matures in 10 years, according to Bloomberg and Reuters reports.
The five-year debt is expected to yield 6.7 per cent, while the 10-year is expected to yield 7.75 per cent. "We are very pleased at the positive market reception to the bond offering, which demonstrates increased investor confidence in the strong long-term value proposition of the emirate of Dubai," said Abdulrahman al Saleh, the director of the Dubai Department of Finance, in a statement. "The Government has taken prudent measures to control costs and manage its budget deficit and this successful issuance provides Dubai with additional liquidity for general budgetary purposes."
But some analysts still have reservations about the emirate's finances. Doubts persist, for example, about the financial condition of Dubai Holding, another government-owned conglomerate, they said. Dubai International Capital, the group's private equity arm, is in talks with banks to roll over a $1.25bn loan that was due earlier this year but has been extended as the negotiations progress. "You still have Dubai Holding unresolved and uncertainties overall, but there is heavy demand for emerging market fixed income and a high-yielding sovereign may do better than expected," said Khalid Howladar, a vice president at Moody's Investors Service in Dubai.
"Given a stagnant recovery and the general refinancing necessary in the next couple of years, the future is difficult to predict. Investors will want to have maximum transparency and know everything that is going on behind the scenes." In an update this week to the prospectus for a $4bn bond programme launched in April 2008, Dubai opened its books to a greater degree than ever before, laying bare many of the hits it took during the financial crisis.
The prospectus update revealed the Real Estate Regulatory Authority was overseeing the cancellation of nearly 500 developments and that the Government had restructured agreements with contractors on the Dubai Metro after its financial ills. It also showed that the Government had direct debts of Dh105.47bn and was running an expected budget deficit of about Dh6bn this year. Investors consider transparency to be a make-or-break issue for Dubai, and a key to unlocking investor demand for Gulf debt and opening up regional markets for other companies and governments to raise money.
"More work needs to get done and we hope they continue moving forward with restructuring and asset sales and improving transparency," Mr Kronfol said. "They shouldn't be complacent. The market has extended some confidence and everyone would do well to note how fragile that confidence can be." Dubai last raised money under the bond programme just weeks before Dubai World announced it would seek a standstill on debt repayments in November.
In a sign that the Dubai bond may already be spurring confidence among bond issuers, Emaar Properties, Dubai's biggest developer, said yesterday that it was looking to raise at least $375m to refinance existing short-term debt. The five-year bond, which has an option to increase by $125m, is expected to yield between 7.25 and 8.25 per cent. "Demand has been extremely strong already," said a banker involved in the deal. "The success of the Dubai bond has been very beneficial and helped to show investors that Dubai is back in the capital market."
Emaar's five-year convertible bond will be aimed at investors from Europe and Asia, the banker said, adding Dubai Electricity and Water Authority was among Dubai names leading the list of other likely issuers after the success of Dubai's sovereign bond. Arab Petroleum Investments Corporation, a lender owned by OPEC governments including the UAE, also said yesterday it was planning to issue a large bond denominated in Saudi riyals. And Qatar Islamic Bank is planning to raise at least $500m through a five-year Islamic bond soon.
afitch@thenational.ae
tarnold@thenational.ae
* with additional reporting by Bradley Hope
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
Celta Vigo 2
Castro (45'), Aspas (82')
Barcelona 2
Dembele (36'), Alcacer (64')
Red card: Sergi Roberto (Barcelona)
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
UAE v Zimbabwe A
Results
Match 1 – UAE won by 4 wickets
Match 2 – UAE won by 5 wickets
Match 3 – UAE won by 25 runs
Match 4 – UAE won by 77 runs
Fixture
Match 5, Saturday, 9.30am start, ICC Academy, Dubai
Company%C2%A0profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3EHayvn%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2018%3Cbr%3E%3Cstrong%3EFounders%3A%20%3C%2Fstrong%3EChristopher%20Flinos%2C%20Ahmed%20Ismail%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EAbu%20Dhabi%2C%20UAE%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3Efinancial%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%20%3C%2Fstrong%3Eundisclosed%3Cbr%3E%3Cstrong%3ESize%3A%3C%2Fstrong%3E%2044%20employees%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3Eseries%20B%20in%20the%20second%20half%20of%202023%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EHilbert%20Capital%2C%20Red%20Acre%20Ventures%3C%2Fp%3E%0A
Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
MO
%3Cp%3E%3Cstrong%3ECreators%3A%20%3C%2Fstrong%3EMohammed%20Amer%2C%20Ramy%20Youssef%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EMohammed%20Amer%2C%20Teresa%20Ruiz%2C%20Omar%20Elba%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Britain's travel restrictions
- A negative test 2 days before flying
- Complete passenger locator form
- Book a post-arrival PCR test
- Double-vaccinated must self-isolate
- 11 countries on red list quarantine
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
'Top Gun: Maverick'
Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en