Posted on 02/23/2006 9:25:42 AM PST by finnman69
Dubai: Local and foreign investors are rushing to subscribe to the world's biggest-ever Islamic bond issue, the $2.8 billion sukuk of Dubai's Ports Customs and Free Zone Corporation (PCFC), the joint book runner to the issue.
Faisal Mikou, a director at Barclays Capital told Gulf News that the investors were attracted by the convertible sukuk's indicative yield of 7.25 per cent to 8.25 per cent which is some 250 to 350 basis points over a two-year dollar Libor swap.
The bond's innovative structure that promises favourable allotment in the planned pre-2007 initial public share offer of the PCFC Group, the holding company of Dubai ports unit DP World and Jebel Ali Free Zone, is also luring buyers, he added.
The innovative structure is a first in the Islamic finance world.
"We were confident of the success of the transaction but we are pleasantly surprised by the market's interest in the issue from across the board," Mikou said by phone from London.
He said that there has been strong interest to subscribe from Islamic institutions, banks, asset management companies and high net worth individuals.
"We have strong interest from across the GCC and Europe and we also have some interest from Asia," he said.
PCFC is raising the money for "general corporate activities, ongoing business development and expansion plans", but the issue is not conditional on the completion of DP World's $5.7 billion bid last month to buy Britain's P&O, the world's fourth-biggest port operator.
Mikou said the sukuk's pricing was fair considering the size of the issue and reflected the risk profile of the transaction, which does not include a guarantee by the Dubai government even though PCFC is fully state-owned.
A spokesman for Dubai Islamic Bank, the other book runner, said the sukuk offers an attractive yield because repayments are not dependent on cash flows of the borrowing company but from a future IPO of a strategic government asset.
Under the offer, the bonds will be repaid within two years, with 70 per cent returned in cash and 30 per cent as equity shares from the planned public offering.
If no IPO takes place prior to the final redemption of the sukuks, investors would be compensated with a higher yield.
Sources said that it was most likely that a new holding company would be set up for DP World, Jebel Ali Free Zone and possibly P&O, which would be floated.
Mikou said average allocations in recent IPOs in the region have been less than one per cent so the favourable allotment in a possible future float was attractive.
"I think PCFC and DP World have been very clever with the financing. The deal was structured in such a way to give them flexibility while ensuring that such a large issue doesn't struggle in the market."
The issue is expected to close this week.
Mikou said PCFC is also likely to raise another $6.5 billion through a syndicated loan early next year if its unit, DP World, successfully completes the acquisition of Peninsular & Oriental Steam Navigation Co. (P&O).
The acquisition of P&O will make DP World the third-biggest ports group globally, although speculation has grown in the past week of a counter bid by Singapore's state-owned investment company Tem-asek Holdings.
also
World's largest sukuk to list on new bourse
http://archive.gulfnews.com/business/Markets/10004321.html
Published: 12/12/2005 12:00 AM (UAE)
World's largest sukuk to list on new bourse By Saifur Rahman, Staff Reporter
Dubai: World's biggest-ever Islamic bond, the Dh10.27 billion ($2.8 billion) sukuk for Ports, Customs and Free Zone Corporation (PCFC), is likely to be listed on the Dubai International Financial Exchange (DIFX) in two months, a senior official said.
"We plan to list a Dh10 billion sukuk on DIFX within the next two months," Fadi Ghosaini, head of business development at DIFX, told a meeting hosted by Dubai Property Group on Sunday.
He, however, did not reveal the identity of the issuer.
Currently PCFC's Dh10.27 billion sukuk is the only Islamic instrument of that size that is being offered for subscription.
The listing of the sukuk would boost the profile of Dubai's newest exchange which witnessed less than expected trading during the initial weeks of its launch.
"This will be followed by the listing of a major real estate investment trust fund on the exchange," he said. "We expect between three to five initial public offerings (IPOs) within the next few months with a combined capital offering of more than Dh3.67 billion."
As many as 15 further IPOs are planned by the end of 2006, he said.
PCFC's sukuk has been launched to finance a £3.3 billion acquisition by its international port management arm, Dubai Ports World, of British ports, ferries and property group, Peninsular & Oriental Steam Navigation Company (P&O).
Ghosaini said, DIFX has identified the property sector as one of the major growth areas for the exchange.
"Dubai's real estate boom has attracted local, regional and international investors into the burgeoning property market," said Ghosaini.
"The DIFX will provide a perfect platform for developers and real estate investors to raise capital by utilising a multitude of fund raising tools currently available. Such tools, which include debt and equity products, can help real estate companies expand their operations or finance projects in a more effective manner," he added.
The size of the region's Islamic bond market is valued less than Dh10 billion.
"If we can tap at least 25 per cent of the $300 billion Swiss funds that are looking for Islamic instruments, it will fetch us $75 billion worth of Islamic funds," he said, explaining the opportunities available in the market.
The DIFX opened on September 26 this year with five listed securities. These are structured products issued by Deutsche Bank, which cover the US S&P 500, the German
Nope, you dont get off so easy. Where are all the American terminal operators?
Guess what, the major American operators (Seal-Land, CSX) made their buisness decisions to sell off their terminal operations. The biggest remaining American terminal operator, SSA Marine, is in a joint ventuer with a state owned Chinese shipping company to run a Long Beach terminal.
Why is it the buisness owners understand the rationale for globalization but the Buchanan brigade isolationists do not?
Are you for all this NAFTA/CAFTA/FREE TRADE/OUTSOURSING? I was merely saying I hate it all and think it puts the USA in a very dangerous circumstance.
Do you want the US to subsidize shipping companies? P&O was not state subsidized. Neither is Hutchinson-Whampoa or PSA or Maersk.
Not that I have a particular dog in this fight, but perhaps because one worships the almighty dollar while the other doesn't? All being a good capitalist means is that you'd sell out your own mother if it made economic sense to do so. Ensuring the nation's security is not the sort of thing a public or private company does in order to make a profit.
I have yet to see a meaningful argument with evidence that a foreign based terminal operator does a worse job than a domestic based terminal operator when it comes to port security.
Where is the comparison between selling your mother for profit and CSX selling off their container terminal operations to focus on their domestic buisnesses? Show me where national security has been compromised?
Elaine: "You know, admitting another man is attractive doesn't mean you're gay."
George: "It doesn't help."
Having a foreign-government-owned or partially foreign-government-owned company anywhere near the controls of a major part of American infrastructure does not sit well with this conservative. It's especially unsettling when the governments involved (or its population) is hostile to the West in general, or to America specifically.
I didn't like it when COSCO took over in Long Beach, and I don't like this company taking over now. That there are no American companies willing to take on this business because they can be more profitable doing other things is not an argument for foreign companies to manage our ports---it's simply further proof that capitalists of any nationality are in business to make money. No capitalist is going to take on this sort of business, and lose money, because of altruism.
No, I don't think you are naive. However, I think you may be a bit off in your opposition to trade among nations.
Thomas Friedman examines the new "flat world" in his excellent book, The World is Flat. I think he is mostly correct in his analysis and I recommend this book (for both proponents and opponents of globalization and free trade).
National economies around the world are increasingly becoming codependent on each other for mutual prosperity and success. While some people may abhor globalization and utsourcing, it is a fact that U.S.-based companies (and stockholders who make up around 60% of the U.S. population) are also benefeciaries.
American companies and businesses (including one-person enterprises!!) are making money while American consumers are paying cheaper prices back home. The loss of any manufacturing base due to offshoring is balanced by increased access to fast-growing markets in Asia, E. Europe, and South America (mainly Chile and Brazil).
China and India had 10.5% and 9% annual growth rates in the last 5 years (at least). Isolationism and anti-globalization may deny these markets (which are so critical to Americans too) in a world that is increasingly becoming interconnected by communcation and technology.
Finally, despite the dire predictions by doomsdayers, globalization may only help America. America has the greatest advantages among all competing nations. These advantages include an excellent technology base, a very well-developed democracy, a rich tradition of capitalism, superb universities (and by extension, a scientific research base), and most importantly, an environment for innovation and risk taking.
With all these advantages, America cannot fail in the global economy. I understand why these concerns exist; Americans are a patriotic people who love their country and their fellow citizens. However, IMHO, these cornerns may prove to be ill-justified in the years ahead.
I am slightly confused w.r.t. the ports deal. As you can see, I believe in globalization and free trade. Trade with the Middle East is critical for American foreign policy, energy policy, and the WOT. Normally, I would be in favor of encouraging free trade with the capitalist element in the Middle East. In this case though, the UAE's prior (and current) pro-Islamic terror actions lead me to believe that American national security should take precedence over free trade.
"No capitalist is going to take on this sort of business, and lose money, because of altruism."
Why could an American company not take on this contract and be profitable? Just seems like another move to help bolster an Islamist nation's economy. We're already doing plenty of that in the crude import biz, IMHO.
No capitalist is going to take on this sort of business, and lose money, because they have a suicidal tendency to spread Islamist Jihad.
Probably because of labor unions.
That's not the whole reason. American firms bidding against a government-subsidized company from overseas. No privately-owned American firm could match the price and be profitable. Bid for less than the real cost of executing the contract.
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