http://www.bloomberg.com/apps/news?pid=20601104&sid=aT8mqf5P8Ams&refer=mideast
By Will McSheehy
May 5 (Bloomberg) — Nakheel PJSC, the developer building islands off Dubai’s coast, received bids for 17 percent more than the $980 million of Islamic bonds it sold this month as investors bet on growth in the emirate’s property market.
State-owned Nakheel got 30 orders worth more than 4.2 billion dirhams ($1.14 billion) from European and Middle Eastern investors for its 3.6 billion-dirham sale of floating-rate Ijarah sukuk maturing 2010, Chief Financial Officer Kar Tung Quek said in a phone interview today.
“Whatever’s happening in credit markets elsewhere, investors are seeing how robust the Dubai real-estate market is,” Quek said. Nakheel had land and property sales of 25 billion dirhams in the first four months of this year compared with 20 billion dirhams in all of 2007, he said.
Nakheel said yesterday it will build an easyHotel-branded hotel near Dubai’s Jebel Ali business park, adding to $30 billion of projects under way that include theme parks with Anheuser- Busch Cos.’ entertainment unit and man-made islands in the shape of palm trees and a world map. Property values in the U.A.E., where record oil revenue has spurred an economic boom, have quadrupled over the last five years, Al Mal Capital said in a March 9 report.
Nakheel’s floating-rate sukuk pay 225 basis points more than the six-month Emirates interbank offered rate, sale manager JPMorgan Chase & Co. said May 1. The rate was last at 2.078 percent, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
Redefined Curve
Meetings to promote the new bonds to potential buyers “redefined our credit curve” in investors’ minds, Quek said, helping to reduce spreads on fixed-rate dollar convertible sukuk Nakheel sold in January this year and December 2006.
Sukuk spreads are narrowing as investors regain confidence in Middle Eastern debt battered by the global subprime credit crisis, James Milligan, HSBC Holdings Plc’s head of fixed-income trading in the Middle East, said in a phone interview from Dubai today. Average sukuk spreads narrowed to 219 basis points today from a high of 265 basis points March 31, the HSBC/DIFX sukuk index shows.
The spread on Nakheel’s floating-rate sukuk narrowed by about 6 basis points since the sale as investors started trading the securities, Milligan said.
“It typically takes a bit time for investor credit departments to get ready to buy new issues,” he said. “Spreads on Middle Eastern corporate credits are tightening and there’s bullish sentiment on the local stock markets” that’s boosting demand for Nakheel’s older convertible sukuk.
Muslim Shariah law forbids interest payments, so an Ijarah sukuk is based on a leasing contract and pays a profit distribution to investors rather than interest.
To contact the reporter on this story: Will McSheehy in Dubai at [email protected]
Last Updated: May 5, 2008 07:34 EDT
