Abu Dhabi/Dubai: Mubadala Development Co, an Abu Dhabi investor with stakes in Carlyle Group and General Electric Co, paid a premium over its existing debt to raise $1.5 billion (Dh5.51 billion) in bonds.

Mubadala priced $750 million of 3.75 per cent notes due April 2016 to yield about 3.98 per cent, or 180 basis points more than similar-maturity Treasuries on Wednesday, according to data compiled by Bloomberg. That is 114 basis points, or 1.14 percentage points, more than the existing 5.75 per cent five-year dollar-denonimated bonds, which yielded 2.84 per cent yesterday.

"I think Mubadala got a fair deal," said Abdul Kadir Hussain, who helps oversee $2 billion in fixed-income assets as chief executive officer at Mashreq Capital. "They paid a premium to their existing bonds, but this is normal for a new issue, otherwise you risk the bond underperforming."

UAE optimism

Progress in the United Arab Emirates and optimism the country will be spared unrest boosted investor confidence. Average yields on debt from the Gulf Cooperation Council fell 68 basis points to 5.3 per cent from this year's high of 5.98 per cent on March 18, the HSBC/Nasdaq Dubai GCC Conventional US Dollar Bond Index shows.

Sales of bonds from the GCC almost doubled to $7.3 billion this year, compared with $3.7 billion in the same period in 2010, according to data compiled by Bloomberg. Issuance fell 23 per cent to $32.2 billion in 2010 and reached a record $41.9 billion the previous year.

Mubadala also sold $750 million of ten-year bonds maturing April 2021 at a yield of 5.56 per cent, or 210 basis points over Treasuries, Bloomberg data shows. The securities were issued by MDC-GMTN B.V. and guaranteed by Mubadala. The yield on the company's existing 7.625 per cent securities due May 2019 dropped 2 basis points to 4.98 per cent yesterday.

The investment company sold $1.75 billion of five-and ten-year notes in April 2009. The sale was split between $1.25 billion of five-year, 5.75 per cent notes that priced to yield 395 basis points more than similar-maturity Treasuries, and $500 million of ten- year, 7.625 per cent debt at a spread of 462.5 basis points, Bloomberg data show.

Abu Dhabi's debt is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's, the third-highest investment grade ranking. The yield on Abu Dhabi government's 5.5 per cent bond maturing in April 2014 gained 1 basis point to 2.31 per cent.

Mubadala plans to increase spending to about Dh60 billion this year as it directs funds to companies such as Advanced Technology Investment Co, Mubadala GE Capital and its Masdar project, according to the bond prospectus obtained by Bloomberg News. The group spent an average Dh16.4 billion over the last three years.

Abu Dhabi, home to more than 7 per cent of the world's proven crude reserves, is seeking to diversify from oil by investing in industries including real estate and aerospace. Capital contributions of as much as Dh37.8 billion have been approved by the government for 2011, Mubadala said in the prospectus.