Flydubai's $500m bond raises $3b

Dubai Aviation Corporation (trading as Flydubai), today came to the market with a landmark debut sukuk transaction and successfully raised $500 million through a 5-year sukuk.

In a media statement the company said that the order book was over six times oversubscribed demonstrating the strong investor appetite for this paper.

“The well-planned and swift execution took advantage of the positive market environment to build a high-quality order book for a 5-year sukuk,” it noted.

“We are very pleased at the excellent market reception to Flydubai’s landmark sukuk issue. The highly successful offering demonstrates the confidence which international investors place in the Emirate of Dubai and its entities and confirms the access to funding which our corporates enjoy from the Islamic Capital Markets,” said Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Flydubai.

“Investors’ strong interest resulted in the order book reaching to over $3 billion, over six times of the offer amount. This is a highly successful result that further confirms the credibility of Flydubai and the investors’ confidence in the promising outlook for Flydubai, and Dubai’s status as a leading global aviation hub,” he added.

The $500m 5-year sukuk priced at a profit rate of 3.776 per cent, equivalent to 200 basis points over the 5-year USD mid-swaps, the company said, adding that the issuance is stand-alone. It also said that proceeds of the issuance will be used for general corporate purposes and refinancing.

The issuance was extremely well received globally and generated a large order book with over 150 investors placing orders of approximately $3 billion. Orders were received from a wide range of high quality fixed income investors, including fund managers, private banks, and banks from a wide geographic spread across Asia, Europe, the Middle East, and offshore US, Flydubai said.

The high-quality and diversified order book enabled Flydubai to price the transaction at a very tight spread, after two price revisions, it noted.

The sukuk issuance saw a geographic distribution of 64 per cent to Middle East accounts, 25 per cent to European accounts, 7 per cent to Asia, and an additional 4 per cent to US offshore.

In terms of distribution among types of investors, the sukuk saw a diverse allocation with 65 per cent to banks, 20 per cent to fund managers, 8 per cent to private banks and an additional 7 per cent going to other types of investors.

The joint lead managers on the transaction were Crédit Agricole, Dubai Islamic Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi, Noor Bank, and Standard Chartered Bank