ABU Dhabi, capital of the United Arab Emirates, on Tuesday (Apr 23) mandated banks for a three-part US dollar-denominated bond issue, its first since 2021, with demand expected to be strong for high investment grade credits from the Gulf.
The emirate plans to sell the benchmark-sized bonds in tranches of 5-, 10- and 30-years, fixed income news service IFR reported earlier.
Benchmark-sized is typically understood to mean at least US$500 million.
Early price guidance for the 5- and 10-year portions was given at around 70 and 85 basis points (bps) over US Treasuries, respectively, while guidance for the 30-year tranche was placed at around 125 bps over UST.
Order books were over US$15 billion at 0915 GMT, IFR reported, signalling healthy demand.
Abu Dhabi, which holds more than 90 per cent of the UAE’s oil reserves, had US$37.8 billion in outstanding bonds as of Dec 31 2023 and US$6.8 billion in loans from local banks, according to an investor presentation seen by Reuters.
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Government debt as a percentage of nominal GDP stood at an estimated 15.7 per cent at the end of 2023.
Justin Alexander, director at Khalij Economics, said the latest debt sale was unlikely due to a need for domestic financing, given Abu Dhabi’s strong fiscal position, although there is a US$3 billion bond maturing in September.
“More likely this is about staying connected to the bond market after a three-year absence,” Alexander, also Gulf analyst at GlobalSource Partners, said, adding that it could also be potential indirect financing for some external investments by the emirate’s sovereign wealth funds such as ADQ.
Government-related entities had US$113 billion in borrowings at the end of last year, the investor presentation said.
Abu Dhabi last tapped debt markets with a US$2 billion, 7-year bond in 2021.
Like other oil exporters in the region, it has accelerated efforts to diversify non-oil sectors such as tourism, logistics, manufacturing and industry, as part of a transition strategy to secure future economic growth.
The emirate is rated “Aa2“ by Moody’s and “AA” by both S&P and Fitch Ratings. REUTERS