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Tue 8 Mar 2011 03:13 PM

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UAE sovereigns to lead $5bn Gulf bonds this year

Oil-rich UAE will dominate sovereign bond offerings, says Britain's Standard Chartered

UAE sovereigns to lead $5bn Gulf bonds this year
BONDS DEAL: IPIC last tapped global bond markets in November with an oversubscribed $2.5bn deal (Getty Images)

The UAE will dominate sovereign bond offerings among the six-member Gulf Cooperation Council this year as government sales in the region total $5bn, Standard Chartered said.

Oil-rich Abu Dhabi, capital of the UAE, may sell $1.5bn in debt in 2011 to create a long-dated benchmark, while Dubai also may issue $1.5bn to fund its budget, Standard Chartered said in an e-mailed report dated Monday.

Outside of the UAE, Qatar and Bahrain may sell $1bn of securities each, the bank said.

Abu Dhabi’s government-owned companies will be the leading issuers of quasi-sovereign debt and may sell $8bn to meet refinancing requirements, acquisition financing and capital expenditures, Standard Chartered said.

Abu Dhabi’s International Petroleum Investment Co is selling bonds as political unrest continues to roil the Middle East.

GCC bond sales have reached $1.1bn so far this year compared with $778m in the comparable period of 2010, with issues in currencies including Swiss francs and Hong Kong dollars, according to data compiled by Bloomberg.

Standard Chartered recommended investors hold less Abu Dhabi government debt than their benchmark indexes indicate because the bonds are overpriced relative to peers. The bank advised an overweight position in Dubai sovereign bonds on bets they will outperform from a total-return perspective.

Yields on Abu Dhabi’s 6.75 percent 10-year bond maturing in 2019 were little changed today at 4.6 percent, according to prices compiled by Bloomberg. The yields on Dubai’s 7.75 percent 10 year bond due in 2020 rose 3 basis points to 8.66 percent today, according to Bloomberg prices.

Dubai World, one of the emirate’s three main state-owned holding companies, roiled credit markets in November 2009 when it sought to delay payments on debt. The company received approval from its creditors in October last year to change terms on $24.9bn of loans.

The six-member GCC includes Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Oman. The UAE is made up of seven sheikhdoms including Abu Dhabi and Dubai.