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ABU DHABI/DUBAI: Abu Dhabi will not issue sovereign bonds this year, while fellow United Arab Emirate member Dubai is determined to get a credit rating in the future, top government officials said yesterday.
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 said that Dubai was readying to issue up to $1bn 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 yesterday.
“We decided not to comment on anything (regarding the bond issue) at this moment,” Saleh said in a brief telephone interview.
The sources said Dubai’s government, which launched a $6.5bn bond programme 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 $100bn in debt, including some $30bn in bonds and loans due to mature in 2011-2012.
One of the most pressing is the $555m loan at Dubai Holding’s loss-making main unit DHCOG, which was due to mature in July but has been delayed until November 30.
“There are a lot of things coming due, DHCOG, Borse Dubai etc. but it is important to use the positive sentiment from Dubai to raise new debt and open markets,” a banker, who did not wish to be identified, said.
Another Gulf-based banker said Dubai may prefer to pay off the DHCOG loan rather than restructure it due to the firm’s closeness to the ruler, Sheikh Mohammed bin Rashid al-Maktoum.
Earlier this month, state-owned Dubai World obtained near unanimous agreement from its bank creditors to restructure almost $25bn in debt, which analysts said eased market uncertainty.
Saleh also said 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 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.
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.