Abu Dhabi's Aabar Investments plans to issue a €750m ($1.06bn) bond exchangeable into German automaker Daimler's shares , of which the sovereign fund owns 9.1 percent.
Aabar said on Tuesday the exchange price would be set at a 30 percent premium to Daimler's share price.
The five-year bonds will carry a coupon indicated at 3.5-4.0 percent and the proceeds from the sale will be used for general corporate purposes, Aabar said.
Bank of America Merrill Lynch , Deutsche Bank and Morgan Stanley are mandated on the sale.
The bonds will represent about 12.2 million Daimler shares, or 1.1 percent of the total, Aabar said.
"In launching the bonds, Aabar is taking advantage of the current market conditions and the attractive financing the equity linked market currently offers," it said.
Aabar, which delisted from the Abu Dhabi bourse last year, bought its Daimler stake in March 2009 for around $2.7bn.
The bonds will be listed in Frankfurt.
Aabar also said it had made derivative transactions on a number of Daimler shares with a counterparty who would buy the automakers' shares at the same time as the bond launch to hedge its exposure.
This may result in significant volumes of trading in Daimler shares, Aabar said. Daimler shares were up 1.3 percent at 0834 GMT.
Aabar, majority owned by Abu Dhabi government investment vehicle International Petroleum Investment Corp (IPIC), is the largest investor in the recent Glencore IPO, having committed $850m to the listing. It also has stakes in Italian lender Unicredit and Virgin Galactic.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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