UAE Govt Guarantee might be given to Dubai's 2nd $10B Bond

It was recently put forth by a government official that there is a possibility that Dubai's second $10 billion bond might be guaranteed by the government of the United Arab Emirates. If this happens, it would help to make the debt more attractive to international banks.

The official said, on the condition of anonymity, "It will be the first time an emirate's bond has been backed by the federal government."

It has been learnt that federal support is being sought by Dubai, in order to aid sell the bond to international banks, which otherwise might be unwilling to purchase the debt as the Emirates continues to restructure its finances. It has been learnt that the bond issue will be the first by Dubai, to be backed by the UAE government.

Abdulkadir Hussein, chief executive, Mashreq Capital said: "A U. A. E. guarantee for Dubai debt will certainly be a positive for the emirate's debt and should ease refinancing concerns."

The first half of the bond program was issued by Dubai's Department of Finance in February, and it totaled $20 billion, all of which was subscribed to by the U. A. E. central bank. The basic aim of the bond program is to hike the much-needed funding for Dubai, in order to aid refinance debt of government-affiliated companies hit by the global financial crisis.

Since Dubai's second $10 billion tranche is being seen as a chief confidence building measure, it is being backed up by Federal government. It might also enhance investors' appetite and help the Emirates secure more attractive pricing.

The bond would be issue by the end of 2009, and is expected by analysts to hit the market before real-estate firm Nakheel, the developer of Dubai's iconic palm islands, needs to refinance a $3.5 billion bond in December.