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Abu Dhabi's TDIC may pause on bond plan

Abu Dhabi, July 14, 2011

Abu Dhabi's government-owned Tourism Development and Investment Co (TDIC) may have to put plans on hold for a 10-year bond issue until market volatility subsides, two banking sources familiar with the matter said.

TDIC, tasked with bringing branches of the Louvre and Guggenheim museums to Abu Dhabi, completed roadshows for a potential bond sale earlier this week but there has been no indication of the company's intention since.

'TDIC is currently watching levels as they want to do a 10-year but the risk premium is too much and investors want a five-year maturity,' said a regional banker familiar with the situation.

Another banker with knowledge of the matter confirmed the company was eyeing a 10-year term while investor feedback indicated a preference for five-year paper.

Bankers at arranging banks said the company was watching markets for an opportunity to issue. Abu Dhabi's Debt Management Office (DMO), tasked with overseeing issuance by state companies is also understood to be considering the matter.

TDIC issued a five-year $1 billion Islamic bond in 2009. In April TDIC's chief executive, James Pringle, said the company would consider a bond issue with a seven to 10-year maturity in the second half of 2011 or early 2012.

Though opportunistic issuers have sought to take advantage of narrowing spreads for UAE credits to price bonds attractively despite the regional political upheaval, continuing concerns about Eurozone sovereign debt have resurfaced.     

This has forced some borrowers to wait until conditions stabilise, including the UAE's Dolphin Energy and Majid Al Futtaim (MAF) Holding.     
'It is the problems of euro debt that is affecting current debt issues in the market,' said Mohammed Ali Yasin, chief investment officer at CAPM Investment.     

'Those worries have increased the volatility in the fixed income markets to levels that are making pricing more expensive for the issuers at the moment. Hence, some are taking the option to delay the issue until conditions improve.'     

Other Abu Dhabi state entities have also issued 10-year paper this year. Mubadala's bonds maturing 2021 were trading with an option-adjusted spread (OAS) at 237 basis points on Thursday, while the spread on the IPIC 2021 bond was at 282 basis points. - Reuters




Tags: abu dhabi | TDIC | bond |

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