x Abu Dhabi, UAE Thursday 20 July 2017

Offering by Abu Dhabi's Ipic boosts bond sales to record

What's Up: GCC bond sales jumped to a record this week after International Petroleum Investment seized on low borrowing costs to raise $2.9 billion.

GCC bond sales jumped to a record this week after International Petroleum Investment (Ipic) seized on low borrowing costs to raise US$2.9 billion in the region's biggest corporate offering this year.

Debt issuances in the GCC, which supplies about a fifth of the world's oil, reached $37.4bn after the Abu Dhabi state-owned energy investor Ipic sold dollar and euro-denominated notes.

That took regional sales almost 4 per cent above the previous record in 2009, according to data compiled by Bloomberg. Ipic's offering topped the $2bn raised by Qatar National Bank this year.

"I bid for all three Ipic tranches," said Sergey Dergachev, a senior portfolio manager at Frankfurt-based Union Investment Privatfonds.

"Immense" sovereign support and the lack of short-dated corporate dollar debt helped to make the sale attractive, he said.

Ipic, which is pursuing refinery projects in the UAE and Oman, has lowered its borrowing costs as investors turned to GCC investment-grade bonds as a refuge from Europe's debt crisis.

The yield on its notes due March 2022, rated the fourth-highest investment grade at Moody's Investors Service, fell 200 basis points, or 2 percentage points, this year to 3.49 per cent, data compiled by Bloomberg shows.

That outpaced the 147 basis-point drop to 3.09 per cent yesterday for HSBC/Nasdaq Dubai's Middle East Investment Grade US Dollar Sukuk/Bond Index.

Abu Dhabi is home to about 6 per cent of proven global oil reserves and boasts Standard & Poor's third-highest investment grade. The emirate's 6.75 per cent dollar bonds due April 2019 yielded 2.1 per cent yesterday, down 119 basis points this year, according to data compiled by Bloomberg.

Ipic priced $750 million in three-year dollar bonds to yield 1.83 per cent. It also issued euro notes valued at €1.65bnin five-and-a-half-year and 10-year tranches, at respective yields of 2.46 per cent and 3.74 per cent.

"Clearly, they were able to take advantage of what is potentially an issuer-friendly market," said Abdul Kadir Hussain, the chief executive of Mashreq Capital in Dubai, who bid for the securities. "There is a lot of liquidity and it's a strong, rated name."

Ipic, which raised $3.75bn in bonds last year, posted a 30 per cent drop in first-half profit to $818m.

Before this week's sale, the company had $17.3bn of net debt outstanding and $3bn of loans maturing next year, according to an investor presentation before the sale.