Dubai Electricity and Water Authority plans to issue an Islamic bond, or sukuk, of at least $500 million this week, after releasing early price guidance for the deal on Tuesday.
The emirate’s sole utility, rated BBB, is aiming to sell the dollar-denominated sukuk at a profit rate in the low three per cent area, arranging banks said.
DEWA Chief Executive Saeed Mohammed al-Tayer indicated last week the sukuk would be $1 billion and that proceeds would be used to repay debt.
As one of the strongest credits in Dubai, DEWA’s sukuk is widely expected to attract strong investor demand. The company’s representatives are meeting investors in London and Kuala Lumpur this week.
“The combination of the DEWA credit and sukuk format is one that should resonate well with investors,” said Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi.
“It gives them access to a credit that is one of the top tier names in ‘Dubai Inc’ whilst being in an asset class where supply is arguably still outstripped by demand.”
DEWA last tapped global debt markets in October 2010, when it priced a $2 billion, dual-tranche conventional bond. The improvement in Dubai’s image among investors since then may help it win better pricing relative to the rest of the market.
Its outstanding $500 million 6.375 per cent bond maturing 2016 was bid at 112.4 cents on the dollar on Tuesday afternoon to yield 2.8 per cent, according to Thomson Reuters data.
Its 2020 maturity, a $1.5 billion bond with a coupon of 7.375 per cent, was bid at about 122 cents on Tuesday to yield about four per cent. Yields have widened about 40 bps since Jan. 10 to coincide with the general sell-off in credit markets.
However, they have stabilised since Feb. 19, which should benefit DEWA as they can issue while rates remain attractive.
Standard Chartered, Citigroup, RBS and local lenders Emirates NBD, Dubai Islamic Bank and Abu Dhabi Islamic Bank are mandated joint bookrunners on the deal.