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Sun 29 Jul 2007 03:45 PM

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Abu Dhabi launches first bond issue

Emirate’s US$1bn five-year bond is 2.7 times oversubscribed, despite tight pricing.

The Emirate of Abu Dhabi has launched and priced its first capital market financing.

The US$1 billion five-year conventional bond is priced at the equivalent of 18 basis points over the five-year swap rate.

This pricing is relatively tight by regional standards, reflecting Abu Dhabi's position as the highest rated sovereign in the Middle East in terms of credit risk. The issue has a coupon of 5.50%, payable semi-annually.

The order book for the transaction was 2.7 times oversubscribed, with fund managers making up 65% of the investor base.

Broken down by region, investors from the Americas took the largest allocation of bonds, representing 42% of the issue.

The bond will serve as a sovereign benchmark for Abu Dhabi and set a reference for private and semi-private corporations and agencies looking to access the international capital markets.

HE Hamad Al-Hurr Al-Suwaidi, undersecretary, Department of Finance, Abu Dhabi, said: "This transaction has succeeded in raising the profile of the Emirate in the international capital markets. We have been very pleased with the substantial level of interest from investors across the globe, and to achieve such an enthusiastic response at a time when financial markets are experiencing significant volatility. Investors have recognised Abu Dhabi's credit strength based on our strong and increasingly diversified economy as well as our long history of domestic political stability."

The Emirate was recently assigned long-term foreign and local currency sovereign ratings of AA by Standard & Poor's, AA by Fitch Ratings, and Aa2 by Moody's Investors Services.