Dubai closes $2bn Bond and Sukuk Issue to improve liquidity

The Dubai Government’s Department of Finance (DOF) has successfully completed a $2 billion Bond and Sukuk issue.

The Department of Finance stated that the issuance process included a ten-year Islamic Sukuk of $1billion at a 2.736 percent profit rate and another thirty-year $1 billion government bonds for a 3.90 percent interest rate.

Abdulrahman Saleh Al Saleh, director-general of DOF stated that “We are satisfied with the success of Dubai in this issuance. DOF was able to obtain the lowest interest rate for 30 -years bonds and the lowest profit for 10-year Sukuk in Dubai government history.”

Al Saleh also added that this bond issuance was following the factor of the emirate’s financial policies which mainly aimed at financial stability and to invest in infrastructure projects while considering the current situation the priority is given the budget circular issued in the second quarter of this year.

In the long-term bond segment, 84 percent of inventors were from the international community. The worth of the order book was over $10 billion which is five times higher than the target value of the bond. This value of order book and the diversified investor base clearly shows the trust of the international community over the strength of the emirate’s economy, says head of investors affairs at DOF, Rashed Ali bin Abood.

The Dubai Islamic Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, and Standard Chartered Bank were instructed by the Government of Dubai to manage the bond issuance process.

Sukuk

A Sukuk is a sharia-compliant, fixed-income capital markets instrument whose terms and structures comply with sharia, with the intention of creating returns similar to those of conventional fixed-income instruments like bonds.

Unlike a conventional bond (secured or unsecured), which represents the debt obligation of the issuer, a Sukuk technically represents an interest in an underlying funding arrangement structured according to sharia, entitling the holder to a proportionate share of the returns generated by such arrangement and, at a defined future date, the return of the capital.