Dubai: Dubai’s government hopes its first 15-year sukuk issue — an unusually long tenor for an Islamic bond — will pave the way for long-term debt sales by its state companies, the Department of Finance said on Wednesday.

Dubai drew $2.3 billion (Dh8.44 billion) of investor demand for the $750 million issue on Tuesday, pricing it at 5.0 per cent, the tight end of initial guidance.

Demand was lower than in Dubai’s last international debt offer in January 2013, which raised $1.25 billion with a two-tranche sale, a 10-year sukuk and a 30-year conventional note. Order books then were some 12 times oversubscribed.

The difference was at least partly due to the sudden nature of this year’s issue, which took advantage of a window that opened in the markets.

“The planning of the issue was completed in a short time in order to benefit from favourable conditions on the global financial markets,” the department said in a statement on its website (www.dof.gov.ae).

Sukuk issues generally tend to have maturities no longer than five or seven years, so the 15-year maturity was striking, suggesting Dubai saw benefits in building a longer-term yield curve.

The issue “would reshape the government’s yield curve and facilitate future long-term issues of the Dubai government companies,” the department said.

Some Dubai state-linked firms were forced to restructure billions of dollars of debt after the emirate’s financial crisis in 2009. Although Dubai is now recovering strongly, it faces the challenge of repaying this debt and raising tens of billions of dollars in coming years to fund ambitious construction projects, including preparations to host the World Expo in 2020.

Abdul Rahman Al Saleh, director-general of the department, noted on Wednesday that the sukuk issue also tied in with Dubai’s efforts to become a global centre for Islamic finance and business.

INVESTORS Some 61 per cent of investors in the sukuk, which has a common sale and leaseback structure known as ijara, came from the Middle East, 17 per cent from Britain and 10 per cent from the rest of Europe, the department said.

The sukuk easily covers Dubai’s officially projected budget deficit this year of 882 million dirhams ($240 million), or 0.26 per cent of gross domestic product. The emirate plans to boost its state spending 11 per cent this year to the highest since 2008 as it launches new infrastructure projects.

However, Dubai and its stake-linked firms face major debt maturities this year; sukuk issued by the department worth the equivalent of $1.93 billion will mature in early November.

Banks arranging this week’s sukuk were Dubai Islamic Bank, Emirates NBD, HSBC, National Bank of Abu Dhabi and Standard Chartered.