The debt issue, first announced in January, is expected to target upwards of $400 million, which will be used to part-finance the infrastructure developments needed for Dubai's 2003 hosting of the annual IMF and World Bank meetings (MEED 18:1:02).

Bankers following the transaction closely say the government's original timetable - which aims for the bond issue to be staged in April - is very aggressive and, with no banks yet mandated to arrange it, there might be some slippage.

'The crucial question is whether they try to force it and insist on staging an international issue,' says a banker watching the deal closely. 'There's not much doubt that a dirham-denominated bond could be got off pretty easily, but there are a lot of problems associated with going international. First, they will have to change the UAE law and second, they will have to get a credit rating.'

The only other bond to have been issued by a UAE institution was a five-year, AED 1,500 million ($408 million) offering from Dubai-based Emirateslast summer (MEED 13:7:01). The airline's bond was not rated.

'They can't issue a Eurobond in international markets without a rating, and they can't get a rating without considerably greater transparency than they've been comfortable with in the past,' says an international banker. 'And there is the associated political problem of Abu Dhabi's underlying financial support for Dubai and the fact that this would not be, in fact, a sovereign bond. The process becomes more complicated the more you think about it.'

Despite what bankers describe as the government's enthusiasm for an international offering, the likelihood is that local capital markets will be more accessible. If this is the path chosen, frontrunners for the lead arranging mandate will include National Bank of Abu Dhabi (NBAD), National Bank of Dubai and HSBC Financial Services (Middle East). NBAD and HSBC were the lead arrangers on the Emirates deal.