Emirates hires four banks for potential bond

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By Shweta Jain  gulfnews.com

Emirates airline has zeroed in on four banks — Deutsche Bank, Emirates NBD, HSBC and Morgan Stanley – for a potential dollar-dominated bond issue, the Dubai-based carrier said yesterday.

Emirates Airlines“Emirates can confirm the appointment of the joint lead managers and our intention to go on a roadshow, with a view to launching a bond if market conditions, including pricing, are favourable,” an Emirates spokesperson said.

When asked about the possible timeframe for the airline to issue the bond, Gary Chapman, Emirates Group President for Group Services and dnata, told Gulf News: “We are not under any pressure to do so. Everything is about opportunity and when we consider the market conditions to be best.”

The roadshows for the bond reportedly will start in Hong Kong on May 23 and end in Zurich on May 30, with the meetings also to be held in Dubai, Abu Dhabi, Singapore, London and Geneva. “We will see what response we get from the roadshows and the issuing of a bond is going to be in line with what we get,” said Chapman.

The news comes just 10 days after Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman and Chief Executive of Emirates airline and Group, said the airline had postponed plans to issue a bond owing to unsuitable prices in the market. He said Emirates Group’s cash balance of $4.4 billion (Dh16 billion) is providing a “good cushion” to the airline.

Commenting on the airline’s timing to issue the bond, Mohieddine Kronfol, chief investment officer for Fixed Income/Sukuk at Franklin Templeton Investment (Middle East), told Gulf News: “Emirates can tap debt capital markets and probably should do so now. The environment now is conducive to get good pricing given spreads for the UAE and the general liquidity situation.” He added that it allows Emirates “longer-term and diversified funding, good reasons for other companies in the region to follow suit as well”. Asked if Emirates would look at Southeast Asian markets, such as China especially, Aerospace and Defence Analyst at Frost and Sullivan, said: “The South-east Asian market is one of the profitable markets along with Europe for Emirates. Flying to South-east Asian markets can help the airline raise money for this bond.”

Orderbook

While Emirates must raise funds for 193 aircraft worth $66 billion it has on order from Boeing and Airbus, it also experienced a challenging first few months this year. It was forced to scale back flights following the geo-political unrest in the Middle East and North Africa and the natural disaster in Japan, besides having had to deal with the volatile oil prices.

The airline, which posted a profit of $1.5 billion for 2010-11 (up 52 per cent from the previous year), in March, fully repaid a $500-million bond that was listed on the Luxembourg Stock Exchange in 2004.

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