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Abu Dhabi returns to bond market with three-part dollar issue

Davide Barbuscia/Dubai
Filed on August 25, 2020
Abu Dhabi was in talks with banks for a new bond issuance. - Reuters

The paper due in 2023 offers investors an initial price of around 95 basis points over US Treasuries.

Abu Dhabi began marketing on Tuesday 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 debt 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 and seen by Reuters showed.

The paper due in 2023 offers investors an initial price of around 95 basis points over US Treasuries and a second tranche due in March 2031 offers around 135 basis points over the same benchmark. The longest tranche, maturing in 2070, offers around 3 per cent.

Sources told Reuters last week that Abu Dhabi was in talks with banks for a new bond issuance. 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 GCC (Gulf Cooperation Council) is largely due to supply risk given they are becoming a more frequent issuer and that will persist if oil prices remain muted," 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 and low oil break-evens - the oil price it would need to balance its budget.

Citi, Deutsche Bank, First Abu Dhabi Bank, Morgan Stanley, and Standard Chartered have been hired to arrange the deal, which should close later on Tuesday, the document showed. Abu Dhabi's department of finance did not immediately respond to a request for comment. - Reuters


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