DUBAI: Emirates airline, Dubai’s flagship carrier, launched a $750m 12-year amortising bond yesterday, with final pricing due later in the day, arranging banks said.
The bond, which matures in 2025 but carries an average life of seven years, launched at 300 basis points over seven-year midswaps, at the wider end of guidance released on Wednesday.
Order books were reportedly over $1.6bn at around 0800 GMT, IFR Markets, a unit of Thomson Reuters reported. Market sources indicated that weakness in credit markets may have affected the borrower’s ability to price at the tighter end of guidance. Moreover, regional deals normally benefit from a solid Gulf bid but the unusual amortising structure of the bond may have found limited appeal among local investors.
An amortising bond is structured in a way that gradually reduces the value of the bond over a fixed period of time, meaning the borrower pays off the full amount before the final maturity date. The issue will begin to make coupon payments from February 2015, a document from arranging banks said.
Emirates’ deal follows a substantially oversubscribed two-part bond offering from the Dubai government last week, allowing the sovereign to price the transaction at some of the lowest borrowing costs available to it.
However, the $750m 10-year sukuk, carrying a profit rate of 3.875 percent, was under pressure this week, trading below its par issue price. The sukuk was bid at 98.6 cents on the dollar yesterday afternoon, according to Thomson Reuters data. The underperformance is a result of aggressive pricing, a weak market and general pressure on sovereign borrowers, bankers and traders told IFR Markets.
Reuters
