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Dubai government-owned Jebel Ali Free Zone (JAFZA), a unit of Dubai World repaid in full a AED7.5bn (US$ 2.04bn) Islamic bond – sukuk, five months ahead of maturity according to an official announcement.

 

The early redemption of the sukuk certificates was not unexpected after the company, secured agreement from bondholders to change the terms of the notes last month. The bond was refinanced through a US$ 1.2bn, along with a new sukuk issue of US$650m and the company's own cash resources.

 

June 23, 2012

 

 

Analysis and Forecast: Decreasing Risk


 

The repayment of the JAFZA bond is a major step in the attempts of Dubai to regain the reputation lost as a result of the 2008 crisis.

 

It is estimated that 2012 is the most challenging year as the year with the highest amount of maturing debt since 2008. It is also a year when various Dubai entities are looking to raise funds by issuing new bonds as well as renegotiating existing loans. The reputational damage that hit Dubai in 2008 has had a profound negative impact on the emirate's ability to attract investors. The repayment of the Jafza bond is a significant contribution to eliminating the negative repercussions resulting from the crisis, and will therefore be expected to have an overall reduction of economic risk.

 

The figure below shows the approximate original maturing debt at the start of the 2008 crisis: