Etisalat’s Dollar Bonds Outperform Euro Paper In Secondary Market

Debut bonds sold by Abu Dhabi-based telecommunications operator Etisalat were bid up in the secondary market on Thursday, with the U.S. dollar tranches outperforming euro paper, traders said.

Etisalat sold $4.3 billion worth of bonds in four tranches on Wednesday, setting one record as the region’s biggest corporate issue ever and another for the cheapest pricing of any Gulf bond above mid-swaps, bankers said.

The two euro tranches attracted massive demand from European investors, particularly fund managers, partly because of the European Central Bank’s decision last week to cut its deposit rate below zero. This caused the euro tranches to price very tightly and then underperform moderately in the secondary market, traders said.

About 80 per cent of the euro bonds – a seven-year, 1.2 billion euro tranche and a 12-year tranche of the same size – went to European investors, allocation data showed – an extremely high ratio for a bond issue from the Gulf.

By contrast, only 46 per cent of the dollar bonds – a five-year, $500 million tranche and a 10-year tranche of the same size – went to Europeans. Thirty-one per cent went to Middle East investors.

At 0915 GMT on Thursday, the 2021 euro bond, which had priced at 99.051, was trading with bid-offer quotes of 99.52-99.67. The 2026 euro bond, priced at 98.329, was at 99.47-99.67, traders said.

The U.S. dollar tranches rose more steeply. The 2019 bond was bid and offered at 100.45-100.60 against its pricing of 99.691, and the 2024 bond at 100.425-100.625 from 99.059.

Lead managers for the Etisalat issue were Deutsche Bank , Goldman Sachs, HSBC and RBS.