Abu Dhabi: The Emirate of Abu Dhabi on May 19, 2020 successfully reopened its recent multi-tranche international bond offering with a $3 billion tap issue, which attracted strong investor interest.
The bond tap capitaliaed on favorable debt market conditions, achieving the lowest yields ever in in the GCC on each of the three tranches, which comprised: a $1 billion 5-year tranche, a $1 billion 10-year tranche, and a $1 billion 30-year tranche.
The tap issue is a continuation of Abu Dhabi’s $7 billion bond issuance, which was successfully completed in April 2020 at an oversubscription level of 6.3, underlining exceptional demand for sovereign bonds by the Emirate. The success of Abu Dhabi’s first ever bond tap, at an oversubscription level of 7 times served as a potent demonstration of the Emirate’s proactive debt management strategy, which is focused on capital structure optimization.
Abu Dhabi maintains conservative levels of debt, with total Government debt at 12.1 per cent of GDP at the end of 2019, which is amongst the lowest in the world and is testament to the Emirate’s prudent fiscal and debt management policies. The 30-year bonds were particularly well received by international investors, who accounted for 98 per cent of the final geographical allocation in this tranche, showcasing trust in Abu Dhabi’s ability to deliver sustained, long-term economic growth. Abu Dhabi remains the only AA rated sovereign in the region.
Strong fiscal position
The Emirate’s net asset position, which exceeds 200 per cent of GDP despite the recent oil price decrease, ensures that Abu Dhabi continues to be in a strong position to leverage market windows.
“Abu Dhabi’s economy remains comfortably cushioned from external shocks, including oil price volatility and the repercussions of COVID-19. Despite pandemic-induced market turbulence, we are in a unique position of strength due to our resilient balance sheet, which is underpinned by modest levels of debt and a solid asset base, including two of the world’s largest sovereign wealth funds,” said Jassim Mohammed Buatabh Al Zaabi, Chairman of the Abu Dhabi Department of Finance.
The proceeds of the tap issue will allow Abu Dhabi to accelerate non-hydrocarbon sector growth with a view to building a resilient, sustainable post-COVID-19 economy in line with the Abu Dhabi Economic Vision 2030.
The tranches priced at 135 basis points over US Treasuries for 5-year bonds, 150 basis points over US treasuries for 10-year bonds, and 182.9 basis points over US Treasuries for 30-year notes.
BNP Paribas, First Abu Dhabi Bank, J.P. Morgan, and Standard Chartered were Joint Lead Managers and Joint Bookrunners.