DUBAI, 12 November 2004 — Dubai Investments plans to issue a 367 million dirham ($100 million) Islamic bond, or Sukuk, by the end of 2004, Chief Executive Khaled Kalban said on Wednesday.
The money will help finance a 400 million dirham expansion at Dubai Investments Park (DIP), an industrial and residential development in Dubai in the United Arab Emirates and wholly-owned subsidiary of Dubai Investments. “We are expanding to meet high demand for this land,” Kalban told Reuters. Pricing would be around one to 1.5 percent above US dollar LIBOR and the tenor would be around six years. The bonds will be open to foreign investors. At present, shares in Dubai Investments are only open to UAE nationals, but Kalban said the company plans to lift this restriction, probably in the second quarter of 2005. Sukuks comply with Shariah law which bans the receipt of interest. But the law does allow revenue sharing schemes that permit assets to produce a return. Sukus normally trade at a fixed spread to an interest benchmark such as LIBOR.
Walid Shihabi, head of research at Dubai-based investment bank Shuaa Capital, said the Sukuk would be popular among Gulf Arab financial institutions if pricing was attractive: “Demand from the buy-and-hold crowd will probably be strong”.