Dolphin completes refinancing

Dolphin Energy, a natural gas company based in Abu Dhabi, has finished refinancing its Dh12.66 billion (US$3.45bn) overall debt after selling $1.25bn in bonds to investors. The project, majority-owned by Mubadala with Occidental and Total as partners, produces gas in Qatar and imports it to the UAE and Oman by pipeline.

The bond, which bankers said was almost four times oversubscribed, is the latest in a series of debt sales aimed at tapping into rising investor appetite for government-related issuances. The $1.25bn 10-year bond was priced at 337.5 basis points above US treasuries. Bankers said spreads had tightened again in recent days, making the bond cheaper for Dolphin. The response to the sale bodes well for other Emirati companies planning to go to the market when it reopens after the summer and Ramadan. They include Etisalat, Abu Dhabi National Energy Company (Taqa) and International Petroleum Investment Company.

"Hopefully this will pave the way for banks and others to follow suit," said Mohieddine Kronfol, the managing director of asset management at Algebra Capital. "It is another sign that companies, especially those backed by the government, can come out and issue." A recent decision by the Federal Government to guarantee bonds is expected to further boost the interest of local companies to issue fresh debt.

In recent months, international capital markets have opened toward the Gulf after all but retreating from the region following the collapse of Lehman Brothers, when investors fled to safe-haven investments such as US treasuries. Although the credit squeeze has eased and companies can again borrow, loan financing remains difficult and expensive. As a result, the growing appetite for Gulf debt has led regional governments and Gulf-based companies with government backing to issue more than $16bn in fresh bonds.

Qatar Telecom, which issued its $1.5bn first bond last month, said it had received eight times more money in bids. The Dolphin debt, which included a bank loan of $2.45bn and $1bn in Islamic financing, was originally due half-way through this month. It was used as bridge capital to finance the company's undersea pipeline project between Qatar's offshore North Field and Taweelah. On Sunday, the bond was trading slightly below its par value, traders said.

Dolphin will pay back the principal in increments leading up to June 2019, when the debt matures. With gas pumping and construction on the pipeline nearing completion, Dolphin is already using revenues from the project to repay money it borrowed to finance construction. Joint lead underwriters were the Royal Bank of Scotland, BNP Paribas, Abu Dhabi Commercial Bank and National Bank of Abu Dhabi.

uharnischfeger@thenational.ae