The global expansion of securitization markets continues with the first-ever Dubai, United Arab Emirates-originated loan backed offering hitting U.S. investors' desks this month, as well as the recent pricing of a transaction backed by commercial property payments originated in Dubai. Last Wednesday saw the completion of a $200 million Gold Sukuk DMCC transaction, which will be followed by a $350 million deal from Emirates National Securitisation Corp., which is scheduled to price this month.

The Gold Sukuk DMCC deal was issued by the Dubai Metals and Commodities Centre, which was set up by the UAE government to establish and grow a commodities trading infrastructure in Dubai. Proceeds from the offering are being used to fund the construction of a three-tower complex that will house commodities market participants.

The first Dubai transaction offered to U.S. investors will be the Emirates National transaction led by Barclays Capital scheduled to market throughout this week before pricing early next week. Totaling $350 million, ENSEC 2005-R1 has a 5.04-year average life and legal final maturity of May 2014. Both Moody's Investors Service and Standard & Poor's rated the transaction triple-A, based on a 100% cash backing by the transaction's trustee, although it was not disclosed.

While, technically speaking, Gold Sukuk DMCC is not a securitization, it is backed by the profit generated from the sale of space in the towers. It is assumed that should cashflows not be sufficient to pay bondholders, the DMCC would cover the difference. "The ratings on DMCC are underpinned by strong implicit credit support from the government of Dubai," according to a presale report issued by Standard & Poor's. But, a source added that according to the plan, the profits from the sales are what will be used to pay bondholders.

Gold Sukuk DMCC, with a five-year legal final maturity and 2.75-year average life, is structured with a semi-annual amortizing structure that is insulated from prepayment risk, the source added. Tenants sign purchase contracts for the space, and then pay DMCC quarterly. All purchasers have paid a 15% downpayment, as of January. "Demand has been strong," according to the source, "Two {of the three] towers are practically sold out." Dubai Islamic Bank and Standard Bank London acted as joint leads on the offering.

The single-tranche deal, rated single-A by S&P, priced at 60 basis points over six-month Libor, resetting semi-annually. Of the total, 44% of the bonds placed were

sold in the Middle East, with 41% sold in Asia and 15% sold in Europe. As a Regulation S offering, U.S. investors were restricted from purchasing.

Copyright 2005 Thomson Media Inc. All Rights Reserved.

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