DUBAI: Dubai, buoyed by tightening spreads and an oversubscribed bond last week from its flagship airline, plans to come back to the debt market itself with a potential benchmark sovereign dollar issue. Dubai's Department of Finance said it intends to issue a dollar bond under its $4 billion medium-term notes program, which was established in 2008. The emirate, which is digging itself out of a massive debt hole following a fiscal crisis in 2009, mandated UBS, Royal Bank of Scotland and Emirates NBD for the bond, which will be used for general budgetary purposes, according to lead managers. Benchmark bond sales are typically at least $500 million. Private meetings with investors in London are planned next week, a banking source said. The emirate last came to the bond market last September when it issued a dual-tranche $1.25 billion bond. That issue was four times oversubscribed and reflected increased global investor demand for higher yields. Dubai's flagship carrier Emirates priced a $1 billion bond last week at the tighter end of guidance with an estimated order book of over $5 billion. "The Emirates bond last week and the reception it received paves the way nicely for an issue from the sovereign," said Chavan Bhogaita, head of markets strategy department at National Bank of Abu Dhabi. "It showed there is appetite out there for Dubai. If you combine this with tighter spreads currently, timing-wise the issue of a sovereign bond makes a lot of sense and will likely see good demand." Appetite for Dubai debt has been rising in recent months, with the emirate seen as a safe haven amid the political instability engulfing the wider region. Dubai's debt insurance costs fell back to levels last seen before its 2009 debt crisis after the Emirates issue. "We've seen some good news with Dubai World's restructuring, Nakheel and Emirates. That offers more comfort to regional and international investors," said Adnan Haider, head of fixed income and equities at Abu Dhabi Commercial Bank. Dubai's five-year credit default swaps were at 321 basis points on Thursday, down 2 basis points from Wednesday, according to Markit data. They soared to above 600 basis points in November 2009 when state-owned flagship firm Dubai World shocked markets with plans to delay repaying $26 billion of debt. The conglomerate reached a $25 billion debt restructuring deal in September. A Dubai government official said in May that the emirate, bracing for some $30 billion in debt redemptions over the next two years, plans to cut state spending by 20 to 25 percent until 2013 to narrow its funding gap. A burst property bubble forced Dubai to get to grips with its debt pile, estimated at $115 billion or 144 percent of gross domestic product, and introduce austerity measures over the past year. Earlier this year, Dubai's ruler approved a 2011 government budget with a deficit of AED3.78 billion ($1 billion), or 1.3 percent of economic output in 2009, the latest year for which full GDP data is available.
