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Emirates Airlines sells $400 million in bonds in Singapore market

Foray biggest by a middle eastern firm

Emirates Airlines, in its first foray in the Singapore bond market, sold $400 million in five- and 10-year bonds, making its issue the biggest by a Middle Eastern company in the primary market.

The 10-year $150 million fixed-rate bond was sold at a coupon rate of 4.64 percent, 85 basis points above the prevailing 10-year swap offered rate, and in line with market guidance, a source close to the deal said.

A five-year $200 million floating rate bond was sold at 63 basis points above the six-month swap offered rate, the person said. The six-month swap offered rate was quoted at 3.25 percent Thursday.

A fixed-rate five-year bond worth $50 million was sold at 4.28 percent, 63 basis points above the prevailing five-year swap offered rate.

Emirates, the largest Middle Eastern airline by number of passengers carried, said in a statement it will use the proceeds for corporate financing needs.

This is the first-ever Singapore dollar bond issue by a non-Asian airline in Singapore, and it has been well-received by a diverse set of investors that includes banks, asset managers and insurance companies, the company said.

"We are gratified by the investors' response to our first bond offering in the Singapore market, which testifies to their confidence in Emirates' financial performance and credit quality," said Sheikh Ahmad Bin Saeed al-Maktoum, chairman and chief executive of Emirates Airline and Group.

The issue will be listed on Singapore Exchange. Joint lead managers and book runners were Citigroup, Singapore's DBS Bank Ltd. and Standard Chartered Bank.

Bankers close to the deal said the sale also reflects signs of a maturing primary market as its success come despite recent volatilities in global financial markets.

"The fact that the deal went through [in] choppy [market] conditions shows the bond market was maturing," said a source close to the deal, adding that the recent initiative by the Monetary Authority of Singapore to attract Islamic financing may further increase Middle Eastern interest.

A second banker said 30 investors, the bulk of which came from Singapore, subscribed to the bonds.

Emirates began preliminary talks earlier this year with DBS Bank and Standard Chartered for the sale of a long-dated local currency bond. Citigroup later joined the two banks as lead manager.

The airline is the third Gulf issuer to test the waters of the Singapore primary bond market. Abu Dhabi Commercial Bank became the first in December when it sold S$80 million in one-year bonds.

Emirates Bank was the second in April with S$50 million.

Bankers expect foreign firms - including new borrowers from the Middle East - to issue more bonds in Singapore this year.

In the first four months of 2006, issuance by foreign companies tripled as they were attracted by the cost-efficiency of currency swaps and substantial liquidity in Asia, bankers said.

In the first four months, 16 foreign issuers raised $1.34 billion, compared with $416 million by seven issuers in the same period a year earlier. Issuance by locals also rose sharply in the first four months and there are signs total bond issuance may exceed last year's $8.85 billion.

Beirut,06 19 2006
The Daily Star
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