Almost a year ago, Dubai shocked the markets by raising nearly $2bn from bond investors just before it announced the $23.5bn restructuring of state-owned Dubai World.

Nearly a year later, much has changed for Dubai. Its international reputation was battered by the handling of the Dubai World restructuring announcement, but the rebuilding effort has begun. First, Dubai World has made rapid progress at reaching a settlement with creditors.

The Roads & Transport Authority (RTA) has also reached a deal with developers of the Metro to settle over $2bn of outstanding bills. It is also in talks over funding issues for other public transport projects.

That has set the groundwork for Dubai’s return to the capital markets in late September 2010. A $1.25bn bond built an order book of nearly $5bn. The emirate managed to capitalise both on improved sentiment towards Dubai and investors’ appetite for yield while interest rates are at historic lows. Dubai had to pay nearly 8 per cent for the 10-year part of its bond.

Although settling the payment issues on the Metro and agreeing the Dubai World debt deal are important, the emirate’s problems have not yet been overcome. Dubai and its state-owned companies still face a $110bn debt burden.

Dubai’s successful bond issue will bring renewed optimism. It also opens up the markets for the best Dubai corporates to refinance their debts and extend their maturities. But the path back to growth does not start yet.