Dubai announced on Thursday that it has raised $1.25 billion from the sale of two tranches of Islamic bonds and that the proceeds will be used for debt refinancing and general budgetary purposes.

A Dubai Metro train speeds past Sheikh Zayed road, Photo: AFP

The five- and 10-year bonds, or Sukuks, were three and half times oversubscribed, a sign investor confidence in the economy is improving, a government statement said.

The five-year $600 million bonds carry a yield of 4.9 percent while the $650 million 10-year bonds have a yield of 6.45 percent, the statement said.

The sale generated a book order with more than 260 investors, including fund managers, insurance companies and banks, who bid for more than $4.5 billion.

"We are very pleased at the positive market reception to the Sukuk offering," Abdulrahman Al-Saleh, director general of Dubai's finance department, said in the statement.

The sale "demonstrates increased investor confidence in the strong long-term value proposition" of Dubai, he said.

Foreign and local investors were "happy" with the steps taken by Dubai to counter the impact of the global financial crisis that hit hard in 2009, adding that the sale provides the emirate "enough liquidity" to manage its budget deficits and debt repayments.

Dubai World, the emirate's largest group, rocked markets across the globe in late 2009 with its debt woes. It announced in March that it has signed a final agreement to restructure $14.7 billion of debt.

In September 2010, Dubai successfully issued a $1.25 billion bond that was four times oversubscribed.

Government-owned carrier Emirates raised $1 billion from the sale of five-year bonds on June 1.

Dubai appears to have restored some confidence since its economic crisis, reaping the benefits of having steady economic growth backed by strong performance in trade and tourism.

It has also remained stable amid uprisings across the Arab world.

Source: AFP