A US$8 billion commercial finance joint venture between GE and Abu Dhabi’s Mubadala is preparing to get a credit rating and sell bonds for the first time next year as the business transitions to a self-funded model and eyes expansion across the Middle East and Africa.
Mubadala GE Capital, as the venture is called, is a cornerstone of Abu Dhabi’s drive to develop its local financial sector and give training to citizens looking at careers in the field. It is also a crucial part of a broader effort to wean the emirate’s economy off oil by partnering with leading global companies to spur private sector activity.
The coming bond issue and geographic expansion represent the next major stage in Mubadala GE Capital’s evolution since it began operations almost four years ago. GE and Mubadala each allocated $4bn of equity to the company when it launched.
“We’ll build the infrastructure, the team, the experts and at the same time launch the process to get a rating,” the chief executive Ron Herman said on Sunday. “We hope to get that rating next year, and we anticipate in the second half of the year to access the bond market.”
The company plans to issue more than $1bn worth of bonds annually, he added, helping to support commercial financing assets that have grown to more than $5bn globally. The bonds are to be both local and international, he said, and will mix with bank loans and other forms of financing to provide diversity.
Mubadala GE Capital has already raised about $700 million this year through a pair of bank loans, and is currently negotiating a third that Mr Herman expects to bring in a similar amount.
Fidaa Haddad, who works with Mr Herman as the managing director of leverage and structured finance, said the company’s independent fund-raising efforts and decreasing reliance on its shareholders were a goalpost for the company at the five-year mark. “We’re investing in the business to get it ready to be self-funded to support both shareholders,” he said.
Like GE Capital, Mubadala GE Capital lends money to companies but does not take deposits. It participates in deals arranged by GE Capital, but also provides financing for local companies in the UAE. It has done about 300 deals in total since it started operations, Mr Herman said, over 65 of which have been local.
Separately, the chief of Mubadala’s real estate unit said yesterday the company was eyeing the United States, Europe and emerging markets to invest in property as it exits developing real estate in its home market.
“We made a conscious shift in strategy where we don’t want to be a developer and compete with property developers. We will focus more on being a real estate investor as part of a new strategy,” Ali Eid Almheiri, the executive director of Mubadala Real Estate, said in Abu Dhabi.
A new strategy that would be in place by the end of the year or early next year would indicate how much capital the company would invest, he said.