Abu Dhabi issues $5b multi-tranche 50-year bond
Traders seen on the floor of the Abu Dhabi Stock Exchange.
Underpinned by strong investor appetite, the bonds are priced at historic low yields. The issuance comprises three tranches: a $2 billion 3-year tranche, a $1.5 billion long 10-year tranche, and a $1.5 billion 50-year tranche.
The 50-year tranche is the longest term for a bond issued by a GCC sovereign issuer, which underscores Abu Dhabi’s robust credit fundamentals and the investors’ trust in the emirate’s future economic prospects.
As the only AA-rated sovereign issuer by all three rating agencies in the GCC region, Abu Dhabi’s proactive medium-term debt management strategy optimizes the capital structure of the emirate and taps into diverse funding sources, while maintaining the current credit ratings.
The bond issuance was 4.8 times oversubscribed (at peak orderbook), with orders coming from over 60 new accounts and an orderbook which peaked at $24 billion.
The 50-year bonds were particularly well received by international investors, who accounted for 95% of the final geographical allocation, showcasing trust in Abu Dhabi’s ability to deliver sustained, long-term economic growth.
Commenting on the offering, Jassem Mohammed Buatabh Al Zaabi, Chairman of the Abu Dhabi Department of Finance, said: “The success of this bond issuance, in the midst of the Covid-19 global crisis, demonstrates the robust credit fundamentals and more broadly the strength of Abu Dhabi’s economy. The 50-year tranche is a first for not just Abu Dhabi but also for the GCC, and a reflection of formidable investor confidence in our economy, credit strength and long-term outlook.” His Excellency continued: “Abu Dhabi has proven its resilience throughout a global challenging economic period. As the UAE prepares for the next 50 years, through its ‘2020: Towards the next 50’ initiative, we are committed to supporting the wise leadership’s national strategy by instilling a culture of fiscal sustainability.” The proceeds of the bond issuance will allow Abu Dhabi to focus on sustaining pronounced non-hydrocarbon sector expansion as the emirate continues to diversify its sources of funding and optimize the deployment of government resources to provide continued and sustainable growth.
The tranches achieved unprecedented pricing at 0.83% for 3-year bonds, 1.732% for 10-year bonds, and at 2.7% the 50-year notes.
Citi, Deutsche Bank, First Abu Dhabi Bank, Morgan Stanley, and Standard Chartered were Joint Lead Managers and Joint Bookrunners.
Abu Dhabi began marketing recently a US dollar-denominated bond, in its third foray into the international debt markets this year as the oil-rich emirate props up its finances following a fall in crude prices. The sale is split into tranches of three, 10 and a half and 50 years, all of benchmark size, which generally means at least $500 million each, a document issued by one of the banks leading the deal showed. The first tranche due in 2023 offers investors an initial price of around 95 basis points (bps) over US Treasuries and the second tranche due in March 2031 offers around 135 basis points (bps) over the same benchmark.
The longest tranche, maturing in 2070, offers around 3 per cent. Abu Dhabi was in talks with banks for a new bond issuance last week. It has already raised $10 billion this year through an initial $7 billion bond in April, which was re-opened the following month. Despite being rated AA by Fitch and S&P and Aa2 by Moody’s - making it overall the Gulf’s highest-rated sovereign issuer - Abu Dhabi offers higher yields than most of its peers outside the region. “The reason they’re wider than similarly-rated credits from outside of the Gulf Cooperation Council (GCC) is largely due to supply risk given they are becoming a more frequent issuer,” said Richard Briggs, investment manager at GAM. But he said the emirate was seen as the strongest oil sovereign credit globally, and its net sovereign debt was still “very negative” given high foreign assets. Citi, Deutsche Bank, First Abu Dhabi Bank, Morgan Stanley, and Standard Chartered have been hired to arrange the deal, which should close later, the document showed.
Abu Dhabi Department of Finance Established in 1962, the Abu Dhabi Department of Finance is mandated to drive fiscal excellence and strengthen the financial sustainability of the Government of Abu Dhabi. The Department is committed to advancing the economic agenda through the application of fiscal discipline, as well as the optimized deployment of Government resources.
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