Dewa to tap bond market in litmus test
Dubai, April 6, 2010
Dubai's state-owned utility kicked off a roadshow on Tuesday to raise up to $3 billion in a litmus test of how Dubai entities will fare in debt markets after the Gulf Arab emirate's refinancing crisis.
Dubai Electricity and Water Authority (Dewa) postponed plans to issue a bond last November when conglomerate Dubai World said it would delay repaying $26 billion in debt.
Bankers at the roadshow in the UAE said Dewa could expect a warm if pricey response, given demand for utility paper from the Gulf region.
'If there is one company from Dubai that can raise funds, it is this one,' said a banker who asked not to be identified. 'Dewa will be able to raise the money but they'll really have to pay - at least 8 per cent they'll have to pay.'
Dewa is on the road to market its proposed $3 billion Global Medium Term Notes (GMTN) programme, rated BBB- by Fitch Ratings on April 1.
The roadshow comes after Dubai unveiled a $9.5 billion rescue plan for Dubai World last month.
Bonds issued under the MTN programme will not carry a Dubai government guarantee, according to the prospectus. Dewa's debt at the end of February stood at 24.24 billion dirhams ($6.6 billion), of which Dh2.19 billion is due in 2010, the prospectus said.
Proceeds from the bond sale will be used for general corporate purposes, and the notes will be listed on the London Stock Exchange.
'It is a litmus test, this is a key deal,' said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi.
'It is significant because it is the first deal out of Dubai after the debt standstill. (It will show) demand that Dubai can generate worldwide and what cost of funding investors demand from Dubai.'
Citigroup, Standard Chartered, the Royal Bank of Scotland and NBAD are mandated banks.-Reuters
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