Dubai Launches Five Year Government Bond

by Carla Johnson, Investors Offshore.com

14 May 2003

The government of Dubai set a precedent this week by launching the country's first ever government bond issue worth Dh1.5 billion ($400 million).

The bond, which has a five year maturity, in another precedent carries the Emirate's first fixed rate interest coupon and is paid twice yearly. The issue is being underwritten by HSBC, Emirates Bank International, National Bank of Dubai, National Bank of Abu Dhabi and Standard Chartered Bank.

To ensure that the prices and spreads are at realistic levels the issue is being based on the five year US dollar swap rate after a price discovery exercise by the joint lead arrangers.

In the initial stages of the bond issue, the minimum investment will be in Dh1 million ($270,000) blocks, though investors will be able to trade smaller Dh 25,000 lots ($6,800) in the near future via exchange brokers. The subscription period is open until the May 27 and dealings in the bond, which are being traded and cleared on the DFM, are expected to commence by the end of the month.

"This transaction marks a new chapter in the development of the UAE capital markets and will contribute to the emergence of an efficient financial market in Dubai," said Ibrahim Belselah at a government sponsored investor's presentation to mark the launch of the bond.

"At the same time, the Government of Dubai is providing an attractive, alternative investment opportunity to investors when short term interest rates are at a historic low," added Belselah.

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