Monday, April 4, 2011

Dubai World Restructuring Positive for Dubai

Since, state-owned Dubai World signed a final  accord with creditors to restructure its debt, about USD25 billion on 23rd March 2011, investors & market participants perceive that it would help in restoring the confidence in Dubai's ability to repay the debt.


·         Dubai dollar bond & extra yield shrinks
The yield on Dubai's debt maturing in November 2014 fell to a record low of 5.24 percent & the extra yield investors demand to own Dubai's 6.396 percent dollar bond dropped to 251 basis points, lowest ever.

HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index shows that the extra yield investors demand to hold the region's sukuk over the London interbank  offered  rate narrowed by 68bps to 322bps, since Dubai World signed a final debt deal with its creditors


·         Increase fund flows to Dubai's high yield bonds
According to EPFR Global, Dubai benefited 64% jump in flows to higher-yielding bonds in 1Q2011


                                
·         Dubai's five year Credit Default Swap (CDS) declining
Dubai's 5 year CDS is currently trading at near 52- weeks low, declined by 9% from 2010's average & plunge by 6% yea-to-date while Abu-Dhabi's  5-year CDS is currently up by 8% from 2010's average.

Interestingly, Dubai is the only place in GCC whose CDS declined the most year-to-date, mainly because of Dubai world deal, despite current uprising in the MENA region.

5-year CDS (bps)

5-Apr-11
YTD Change
2010 Avg.
52-week high
52-week low
Dubai
379
-6%
415
491
377
Abu-Dhabi
101
15%
94
119
90
Saudi Arab
116
57%
76
143
70
Qatar
102
23%
88
120
80
Oman
142
-4%
149
194
128
Bahrain
306
72%
186
359
167
 Source: Bloomberg & Reuters

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