ECONOMY er-sectors
Gulf tourism firm to issue sukuk
DUBAI - Bloomberg | 10/13/2009 12:00:00 AM |
Tourism Development & Investment Co., a developer of hotels in Abu Dhabi, may raise $1 billion from a five-year Islamic bond issue.
Tourism Development & Investment Co., a state-owned developer of hotels in Abu Dhabi, may raise $1 billion from a five-year Islamic bond issue that could be the biggest international sale from the Gulf this year, bankers familiar with the deal said on Tuesday.
The Islamic bond, also known as sukuk, may be priced to yield around 240 basis points above the benchmark mid-swap rate, according to one banker who didn’t want to be identified because the details are private. The bids for the issue exceed $4 billion, he said.
TDIC sold $1 billion of five-year conventional bonds in June that were priced to yield 390 basis points over benchmark U.S. Treasuries, according to data compiled by Bloomberg. That bond, which is up 7.4 percent since it was issued, was trading at $1.0779 at 5:33 p.m. in Dubai, yielding 4.64 percent.
HSBC Holdings, Abu Dhabi Commercial Bank, and Standard Chartered will manage the sale, according to the banker.
TDIC’s sale may be the biggest international Islamic bond offering from the Gulf region following the global credit crisis. Sorouh Real Estate, another Abu Dhabi- based property company, sold 4 billion dirhams ($1.09 billion) of Islamic bonds to finance new developments in August 2008.
Abu Dhabi’s government and its state-affiliated firms are leading a borrowing surge from the Gulf region this year. TDIC’s issue follows recent state bond sales from the emirate’s government and sales by Mubadala Development and Aldar Properties.
Islamic bonds, or sukuk, are asset-based securities that pay a profit distribution to investors as Muslim law forbids interest payments.
Moody’s Investors Service rated TDIC’s Islamic bond a provisional Aa2, while Standard & Poor’s assigned an AA preliminary rating. TDIC plans to use proceeds from the certificates to fund land development, according to S&P.