Both Gulf Arab emirates have been testing investor interest
in potential debt issues during recent months, with sources indicating
debt-crisis hit Dubai may be first to tap the market.
Last week, two sources told Reuters that Dubai was readying
to issue up to $1 billion in bonds as early as this week, the first sovereign
placement from the emirate since its debt crisis rattled the markets in
November 2009.
However, Department of Finance chief Abdulrahman Al-Saleh
declined to comment on the potential bond issue on Sunday. “We decided not to
comment on anything (regarding the bond issue) at this moment,” Saleh told
Reuters in a brief telephone interview.
The sources said Dubai’s government, which launched a $6.5
billion bond program last October, is eyeing a maturity of up to seven years
for its paper.
Analysts see government debt issues as one of the financing
options for Dubai as its state-owned firms sit on more than $100 billion in
debt, including some $30 billion in bonds and loans due to mature in 2011-2012.
Saleh also told Reuters Dubai was not seeking a sovereign
credit rating at the moment and confirmed his comments to daily Al-Khaleej that
the emirate was determined to get one.
When asked whether it was rather likely next year, he said:
“We do not know yet. It depends on circumstances and market conditions.”
Dubai had faced heavy criticism from investors over a lack
of transparency after it sought to delay hefty debt payments linked to its
conglomerate Dubai World last year.
Analysts have said the absence of a credit rating could make
it difficult for Dubai to issue debt at a reasonable price.
Obtaining one will improve clarity over its creditworthiness
and help broaden a demand base as some investors cannot tap into unrated debt
issues. However, a rating would also place the emirate under regular scrutiny.
Dubai clashed with Standard & Poor’s in January, after
the agency downgraded and then withdrew its rating on a top government-linked
company, DHCOG.
Abu Dhabi, which accounts for 10 percent of the world’s oil
reserves and over 60 percent of the UAE economy, has been rated ‘AA’ by
Standard and Poor’s and Fitch Ratings. It is seen by many investors as a
stronger credit thanks to its oil income. However, the emirate’s top official reinforced on
Sunday a view that there was no immediate issue in the pipeline, saying it may
come later than 2010.
“We are testing the market and we have seen that the market
is very responsive. We will act accordingly,” Mohammed Al-Bawardi,
secretary-general at Abu Dhabi’s executive council, told reporters on the
sidelines of an energy conference.
Earlier this month, an official at Abu Dhabi’s debt
management office told Reuters there would be no sovereign bond issues soon
after the government road shows that took place in several European countries.
Abu Dhabi, which accounts for nearly all oil wealth of the
world’s third largest crude exporter, last tapped the markets in April 2009,
selling $3 billion worth of sovereign debt.
