Dubai plans a US $1.8 billion bond issue

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On Monday, the finance chief of Dubai announced plans of the government to issue a bond to refinance part of its debt maturing in April 2013.

Abdulrahman al-Saleh, Director General of the Dubai Department of Finance, also commented to a local daily that the emirate is not under pressure to issue bonds.

He also commented that issuing future bond could support the expansion of the aviation sector of Dubai. He did not disclose details about the size or timing of the new bond programme or gave further details. The Al Bayan newspaper did not quote the interview and only paraphrased the words of Saleh.

Unrated Dubai last sold sovereign debt of $1.25 billion in April this year . The two-tranche Islamic bond had to cover its budget deficit and to refinance its debt.

Gulf bonds have surged strongly in the secondary market this year due to lower pressure on global interest rates. Dubai names have led the surge as the emirate has been dealing with some of its corporate debt problems successfully.

As a result, more regional borrowers are expected to take advantage of the good conditions by issuing debt in the near future.

The UAE central bank noted earlier this month that Dubai might achieve economic growth of 4% or more this year.

Dubai, which does not have the oil wealth of neighbouring Abu Dhabi, was hit hard by a $25 billion debt restructuring at its major conglomerate Dubai World in 2009-2010. This happened right after a real estate bubble burst. Moreover, restructuring at some other state-linked entities also continues.

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