Abu Dhabi returns to bond market, raising US$5b in three-part bonds

[DUBAI] Abu Dhabi raised US$5 billion through a three-tranche bond offering on Tuesday, the oil-rich Gulf emirate's third foray into the international debt markets this year to prop up its finances following a fall in crude prices.

It raised US$2 billion in three-year bonds at 65 basis points (bps) over US Treasuries, US$1.5 billion in 10-1/2-year notes at 105 bps over the same benchmark and US$1.5 bln in a 50-year tranche at 2.7 per cent, a document issued by one of the banks leading the deal and seen by Reuters showed.

"The pricing was very close to the existing secondary market comparables. Looks like we are back to almost pre-Covid era pricing for regional investment-grade sovereigns," a fixed income strategist said, adding that the 50-year tranche was the longest ever issued from the Gulf.

Sources told Reuters last week that Abu Dhabi was in talks with banks for a new bond issuance. It had already raised US$10 billion this year through an initial US$7 billion bond in April, which was reopened 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.

On Tuesday, Abu Dhabi tightened the offered yields by 30 bps across the three tranches from where it began marketing them. It received over US$24 billion in demand for the debt sale.

REUTERS