Dewa draws $17 billion demand for bond
Dubai, October 14, 2010
State-owned Dubai utility Dewa drew hefty demand of $17 billion for a $2 billion two-tranche bond it launched on Thursday, helped by juicy yields and improved sentiment towards the debt-laden emirate.
Dubai Electricity and Water Authority's six and 10-year bonds are its second issue this year and follow last month's successful offering by its owner, the Dubai government.
Dubai's monopoly supplier of electricity and water launched a $500 million six-year tranche at a yield of 6.375 percent and a $1.5 billion 10-year tranche at 7.375 percent, in line with earlier guidance, lead management and market sources told Reuters.
Thursday's initial guidance was at 6.5 to 6.625 percent for the six-year tranche and 7.5 to 7.625 percent for the 10-year tranche.
"It is a good yield from the investor perspective," said Michael Ganske, head of emerging markets research at Commerzbank in London. "It could have been a slightly lower yield ... it is very hard to price, because there is still this memories effect," he said. "From this side it is a tough call what is a fair yield on such an issue."
Final pricing will take place later on Thursday.
Analysts expected solid demand for Dewa's paper after short-term debt concerns eased following Dubai World's $24.9 billion debt restructuring deal last month, as well as global appetite for riskier, higher-yielding assets.
In April, 'Ba2'-rated Dewa was the first Dubai name to unfreeze the market locked by Dubai's debt woes, attracting $11.5 billion in bids for a $1 billion bond, despite a high 1.25 percent premium to the underlying sovereign.
Dubai, an oil wealth-lacking member of the United Arab Emirates, sold a $1.25 billion bond last month, its first since the debt crisis last year, drawing demand of over $5 billion.
The unrated sovereign issue was priced at a yield of 6.7 percent on the $500 million five-year tranche and 7.75 percent for the $750 million 10-year tenor.
The yield on Dewa's five-year paper stood at 6.366 percent on Thursday, down from Wednesday's close of 6.389 percent and May's high of 8.688 percent. The comparable Dubai bond was at 6.283 percent on Thursday.
Dubai's firms have been climbing out of a $100 billion-plus debt hole over the past year. Medium-term concerns still remain as Dubai and its firms face some $30 billion in debt maturing over the next two years.
Analysts said global appetite for emerging debt was expected to stay high over the next few months. "There is a rush for yields and there is going to be interesting primary market activity on the bond market," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments based in Dubai.
Moody's raised Dewa's credit outlook to positive from stable this week, citing the firm's stronger liquidity.
Lead managers for the issue are Citi, Credit Agricole, National Bank of Abu Dhabi, RBS and Standard Chartered. - Reuters
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