Emirate of Abu Dhabi issues £5 billion multi-tranche bond

Emirates of Abu Dhabi has successfully issued multi-tranche bonds for the international markets. In a statement sent to the local newsrooms, the Abu Dhabi Department of Finance said it had priced a £5.64 billion (circa $7 billion) bond split into a £1.61 billion 5-year tranche, a £1.61 billion 10-year tranche, and a £2.42 billion 30-year tranche.

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The issue is meant to optimize the capital structure of Abu Dhabi as part of its medium-term strategy of exploring diverse funding roots.

According to sources familiar with the placement, 100 new accounts placed offers, with the order book’s total subscription base ballooning close to seven times more than the initially targeted figure.

A Statement by the Abu Dhabi Department of Finance indicated: “The exceptionally strong demand underlines the continued trust in the Emirate’s fiscal strength and resilient balance sheet, which is underpinned by modest levels of debt and a solid asset base, including two of the world’s largest sovereign wealth funds. The 30-year bonds were particularly well received by international investors, who accounted for 98 per cent of the final geographical allocation in this tranche, showcasing trust in Abu Dhabi’s ability to deliver sustained, long-term economic growth.”

The bond prices were set 220 basis points above 5-year US notes, 240 basis points over the 10-year ones, and 271.1 basis points above the US 30-year notes.

Growing trust

According to the UAE Finance department, the success of the issuance stands to affirm the world’s confidence in the country to generate sustainable economic growth, amid tumbling global oil prices and the COVID-19 pandemic.

Jassim Mohammed Buatabh Al Zaabi, Chair of the Abu Dhabi Department of Finance noted that the Emirate’s strong credit ratings and robust credit fundamentals coupled with stable outlooks have made the UAE a world-class investment hub.

The current global economic turmoil notwithstanding, from January to date, the Emirate of Abu Dhabi has sustained the tightest prices in the whole of the Middle East and North Africa (MENA) region. An April World Bank report by the regulator’s economists indicated that the overall output of MENA is expected to decline this year, in sharp contrast with a last year growth projection of about 2.6%.

As a result of a steady decline in the debt profile of Abu Dhabi, the sovereign state has considerable latitude for additional debt, Al Zaabi said, adding that the nation’s debt management strategy was vital towards realizing Abu Dhabi Economic Vision 2030.

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