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Abu Dhabi, UAEMonday 24 September 2018

Abu Dhabi says $10 billion bond three times oversubscribed

More than three quarters of bonds were bought by foreign investors

It's another foggy morning in the Emirates. Christopher Pike / The National
It's another foggy morning in the Emirates. Christopher Pike / The National

Abu Dhabi's US$10bn bond sale was three times oversubscribed with more than 75 per cent of the orders coming from investors in developed markets, where bond yields are relatively low.

"The strong reception of the offering in the international debt capital markets is a clear testament to Abu Dhabi's solid and strong credit story," said Riyad Abdulrahman Al Mubarak, the chairman of the Department of Finance. "As we look ahead, we will continue to prudently manage our indebtedness levels, which are currently one of the lowest globally.”

The issue, scheduled to settle on October 11, is Abu Dhabi's second foray into the international debt market in less than two years. The emirate, which accounts for about 6 per cent of the world's proven oil reserves, last tapped the market with a $5bn in April 2016. Abu Dhabi, like its GCC peers is seeking to diversify its sources of funding amid lower oil prices.

Saudi Arabia, Opec's biggest oil producer, also secured $12.5bn from its second bond sale this year. Oman, Qatar, Bahrain and Kuwait have shored up their finances through domestic and international bond deals over the last two years. The Abu Dhabi takes bond deals from the Middle East and North Africa to a record $89 billion this year, according to data compiled by Bloomberg.

The Abu Dhabi sale, which attracted about 500 orders worth $30bn , was 78 per cent allocated to foreign investors with the remaining 22 per cent going to investors from the Middle East .

Bank of America Merrill Lynch, Citigroup, First Abu Dhabi Bank, HSBC and JP Morgan were joint lead managers and bookrunners. Abu Dhabi Commercial Bank and Union National Bank were the co-lead managers.

The bonds were sold in three tranches. The first 2.5 per cent $3bn tranche that matures in 2022 was sold at 65 basis points over US treasuries. The second 3.125 per cent $4bn tranche that matures in 2027 was priced at 85 basis points over the US benchmark, while the third $3bn tranche offering 4.125 per cent which matures in 2047 was sold at 130 basis points above treasuries.

In terms of the geographical spread of the foreign investors, the US took the lion's share of the paper with American buyers making up 41 per cent of those who purchased the 5-year bond, 31 per cent of the 10-year bonds, and 47 per cent of the 30-year bonds.

Fund managers were the biggest buyer of the bonds, followed by banks and private banks, according to the Department of Finance.

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Global yield hunters are hawkish on GCC bond market, Deutsche Bank says

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nvestors from developed markets like the US and Europe are particularly interested in emerging market dollar bonds from highly rated states like Abu Dhabi because of the low yields they get on bonds issued in their domestic markets .

"We are pleased to witness investors' high confidence in the Emirate's fundamentals – namely, our wise leadership, focused growth strategy and high buffers. These strengths have collectively created a diverse, robust and sustainable economy."

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