Abu Dhabi sold $10bn of bonds in a three-part deal in its first international offering in two years as it takes advantage of relatively low borrowing costs.
The emirate sold $3bn of five-year fixed notes, $3bn of notes due 2029 and $4bn of 30-year notes. The sovereign — which boasts the third-highest grade from Moody’s Investors Service and S&P Global Ratings — didn’t need to offer an extra premium to its yield curve to attract investors.
Details of Abu Dhabi’s bond sale:
* Debt due 2024 at yield premium of 65 basis points more than Treasuries of similar maturity versus initial price thoughts of 80 basis points.
* Securities due 2029 at a spread of 85 basis points versus indicative pricing of about 100 basis points.
* And 2049 bonds at 110 basis points compared with an earlier guidance of 125 basis points.
The emirate is taking advantage of investor demand for high-quality debt amid concern about the US-China trade war and slowing global growth. Its credit rating is among the strongest in the Middle East and Africa, and the cost to insure its debt against default is the lowest in the region.
“With a fortress-like balance sheet, they can afford to come to market at minimal or no concession,” Patrick Wacker, a fund manager for emerging-market fixed income at UOB Asset Management in Singapore, who bought the bonds to diversify his investments. “We like the sovereigns’ very strong fundamentals.”
Still, Abu Dhabi paid an additional yield premium of around 10 basis points on its bond due 2024 compared with Qatar’s debt of similar maturity. The gas-rich nation is rated one level lower than Abu Dhabi by the three major rating companies.
The spread for the 2029 notes was about 20 basis points higher than South Korean securities, which, like Abu Dhabi’s notes, are rated Aa2 by Moody’s.