Abu Dhabi Issues US$7 Billion In Multi-Tranche Bonds

The Emirate of Abu Dhabi on 8th April 2020 priced a US$7 billion multi-tranche international bond offering, which attracted strong interest from international investors.

In a statement today, Abu Dhabi Department of Finance said the successful issuance is an integral component of Abu Dhabi’s medium-term strategy focused on optimisng the capital structure of the Emirate. The high demand is testament to investors’ continued confidence in the Emirate’s credit strength and resilience.

As a result of decades of fiscal prudence, Abu Dhabi has a strong balance sheet and a robust debt profile, which yields substantial capacity to add debt. This capacity led to the development of the global medium-term bond strategy. Accessing diverse funding sources whilst maintaining the current credit ratings is a key component of the strategy. Abu Dhabi is the only AA rated economy in the region, a position which serves to underscore the Emirate’s credit capability.

The transaction comprised of three tranches: a $2 billion 5-year tranche, a $2 billion 10-year tranche, and a $3 billion 30-year tranche.

With orders coming from over 100 new accounts and the order book reaching in excess of $45 billion, the issuance was more than 6.3 times oversubscribed, marking a new record for Abu Dhabi.

The exceptionally strong demand underlines the continued trust in the Emirate’s fiscal strength and 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. The 30-year bonds were particularly well received by international investors, who accounted for 98 percent of the final geographical allocation in this tranche, showcasing trust in Abu Dhabi’s ability to deliver sustained, long-term economic growth.

The tranches priced at 220 basis points over US Treasuries for 5-year bonds, 240 basis points over the same benchmark for 10-year bonds, and 271.1 basis points over US Treasuries for 30-year notes.

Commenting on the offering, Jassim Mohammed Buatabh Al Zaabi, the Chairman of the Abu Dhabi Department of Finance, said, "The success of the issuance, particularly amidst the global uncertainties caused by the COVID-19 pandemic and the oil price decline, is testament to the continued confidence placed in our aptitude to generate sustainable economic growth. Our robust credit fundamentals and strong credit ratings with stable outlooks have enabled us to attract remarkable demand from a diverse pool of investors from the international debt capital markets."

He continued, "The debt profile of Abu Dhabi continues to be prudent, underscored by low direct Government debt. As a result, we have substantial fiscal flexibility and the capacity to add debt. On that basis, we seized the opportunity to capitalise on the current available market window. Our debt management strategy is a vital component of Abu Dhabi’s economic development and supports the Abu Dhabi Economic Vision 2030."

Despite a challenging global economic environment, for the year to date, Abu Dhabi remains the tightest priced sovereign from the MENA region.