Emirates Sukuk may yield below region

Emirates may pay less than other Gulf corporate issuers to sell Islamic bonds after global borrowing costs declined and as the world’s biggest international carrier benefits from passenger growth The airline, which is considering refinancing $550 million of sukuk maturing in June, may pay 339 basis points over similar maturity midswap rates, or about 4.55 per cent, according to the average estimate. The forecast is below the 4.62 per cent average yield on the eight corporate Gulf Islamic bonds included in the HSBC/NASDAQ Dubai GCC Corporate US Dollar Sukuk Index. Emirates is benefiting from a 19 per cent passenger increase through Dubai’s airport in February. That follows a record 51 million travelers in 2011. Sales of Islamic debt in the Gulf surged to $8.3 billion in 2012 from $1.53 billion in the year-earlier period as average corporate yields tumbled to a record low, data compiled by Bloomberg and HSBC/Nasdaq show. “Markets have tightened markedly in the past few months and Emirates airlines have only continued to strengthen their financial base,” Thomas Christie, a fixed-income sales trader at Rasmala Investment Bank in Dubai, said by e-mail April 9. It will be cheaper for Emirates to raise funds than when it sold $1 billion of non-Shariah compliant bonds in June, he said. The 5.125 per cent dollar notes maturing in June 2016 were priced to yield 330 basis points over the five-year midswap rate, a benchmark used to price many types of bonds. Emirates will study “the economics” of both bonds and sukuk as refinancing options, Gary Chapman, president of the airline’s travel service unit Dnata, said in an interview on April 8. The “market is awash with funds” at “relatively attractive pricing,” and the company will decide after announcing financial results early to mid-May, he said.