The Dubai port operator DP World is returning to the bond markets after an eight-year hiatus as the Gulf emirate seeks to cement its role as a global trading hub.
The offering would be DP World’s first straight bond sale since 2007 and comes just weeks after the company announced $3.1 billion of acquisitions in Canada and Dubai. DP World, which operates ports from China to Peru, has said 2015 will be a “busy year” for new projects as it boosts capacity about 4 per cent to 42 million twenty-foot equivalent units.
“DP World is expanding its operations all over the world and has got a lot of projects it needs to fund,” Doug Bitcon, a Dubai-based fund manager at Rasmala Investment Bank, said by phone Tuesday. “It makes complete sense that it’s tapping the market now, especially with interest rates so low.”
The government-owned company hired banks including Barclays and Deutsche Bank to raise at least $500 million in a benchmark debt sale this month, it said in a statement Tuesday. Investor meetings will take place in the US, the UK and the UAE starting Thursday.
DP World’s recent acquisitions include Maher Terminal’s Fairview Container Terminal on Canada’s west coast for C$580m ($482m) and in March it completed the purchase of Dubai industrial-parks operator Economic Zones World FZE for $2.6 billion from its own parent Dubai World.
“The only place that DP World can get the type of funding needed for these long-term assets they’re investing is in the bond market,” Mr Bitcon said. “It makes sense for them to go for a long-term bond as well.”
DP World is adding capacity at Yarimca, near Istanbul, Mumbai’s port of Nhava Sheva, Europe’s biggest port at Rotterdam, and Dubai’s Jebel Ali Terminal 3 this year. The company is also “getting closer” to a decision on investing in Ecuador and is “very interested” in developing a free zone in Senegal, chairman Sultan Ahmed Bin Sulayem said in March.
DP World would be one of only four non-financial companies in the region to sell bonds this year. Of the $11.4bn raised through such sales in the Arabian Gulf so far, $10bn has been raised by banks, according to data compiled by Bloomberg. Emirates Telecommunications raised $400 million and Oman Electricity $1bn last month. Emirates airline sold $913m in Islamic bonds earlier this year.
“It’s a good time for corporates to issue bonds as the market is open,” Zafar Nazim, a London-based credit analyst at JPMorgan Chase & Co, said by phone Tuesday. “Investors in the Gulf region are keen on investing the abundant liquidity that’s available.”
While the company, which is more than 80 per cent owned by Dubai World, sold $1bn of convertible bonds in June, the planned offering would be DP World’s first straight bond sale since it raised $3.25bn in 10-year and 30-year securities in 2007. The yield on its sukuk due 2017 was at 2.42 per cent on May 5, 16 basis points above a low reached in February.
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