Dubai repays $1.9b from pre-crisis debt

Dubai redeemed $1.93 billion of Islamic bonds that were sold in 2009 before the emirate roiled global capital markets by seeking to freeze debt payments.

The government settled a 2.5 billion-dirham ($681 million) sukuk and a separate $1.25 billion security complying with Shariah that matured today, the state-run WAM news agency reported. The yield on Dubai’s dollar-denominated Islamic bonds due in January 2023 fell two basis points to 3.79 percent, the lowest in almost two months.

The bond payments reflect Dubai’s “commitment to repay all liabilities as per schedule,” WAM cited Abdul Rahman Saleh Al Saleh, director general of the Dubai Department of Finance, as saying. It comes after Abu Dhabi agreed in March to roll over $20 billion of its neighbor’s debt for five years, helping improve investor perceptions of Dubai’s credit worthiness.

Dubai’s economy will grow about 5 percent in 2014, the International Monetary Fund said in May, the fastest pace in seven years. The city, one of seven members of the United Arab Emirates, raised $750 million from the sale of 15-year Islamic bonds in April to help repay some debt.

The government and state-owned companies borrowed more than $110 billion to invest in transforming Dubai into a Middle East tourism and financial-services hub. The notes redeemed today were sold just three weeks before Dubai World sought a standstill agreement from creditors on separate debt.-Bloomberg