Abu Dhabi joined the list of Gulf states selling foreign bonds to bolster their finances in the face of falling oil and gas prices.
The emirate is selling five-, 10- and 30-year dollar notes, said a person familiar with the matter, who asked not to be named.
The energy-reliant economies have offered premiums to their existing securities to attract investors after the coronavirus all but shut bond markets for developing-nation borrowers in March.
“Qatar and Abu Dhabi were obvious candidates to open the floodgates,” said Angad Rajpal, the head of fixed income at Emirates NBD Asset Management in Dubai. “Given expectations for a slow recovery in the second half of the year, these issuers have probably established that this is the most conducive window to issue in.”
Initial price talk on Abu Dhabi’s short tranche is 265 basis points over US Treasuries, which would equate to a yield of roughly 3.11 percent. The 10-year securities are being marketed at a spread of 285 basis points and the longer debt at a yield of 4.55 percent. The latter is about 60 basis points above the rate on Abu Dhabi’s $4 billion of bonds maturing in 2049.
The government is rated AA by S&P Global ratings, one level higher than Qatar. The “super cheap” initial price guidance probably reflects its intention to raise a large amount of money, Rajpal said.
The capital of the United Arab Emirates is selling debt ahead of Thursday’s meeting of Opec+ producers. The world’s largest oil suppliers are discussing a deal to curb supply. Failure to reach an agreement could move oil prices, which have more than halved this year, even lower.
“If oil prices remain depressed at these levels, it is much better to borrow money now before it gets tougher,” said Sergey Dergachev, a money manager at Union Investment Privatfonds GmbH in Frankfurt. “Now it seems we have a calm spot, and high quality issuers would like to make use of this opportunity.”
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