Abu Dhabi entities return to debt markets

10 May 2016

State-owned companies engage in bond issuances

Abu Dhabi’s Mubadala Development Company is said to be marketing a $500m seven-year bond to international investors.

The pricing is about 170 basis points (bp) over mid-swaps.

US-based Bank of America-Merrill Lynch and JPMorgan, France’s BNP Paribas and Societe Generale, the local First Gulf Bank, and Japan’s Mitsubishi UFJ are arranging the deal, according to a report by UK news agency Reuters.

Mubadala is rated Aa2 by the US’ Moody’s Investors Service, AA by the US’ Standard & Poor’s and AA by the US’ Fitch Ratings, thanks to a high level of government support.

The investment company had revenues of AED34.1bn ($9.3bn) in 2015, and profits of AED1.2bn.

The return to the debt markets follows Abu Dhabi’s $5bn dual-tranche sovereign issuance. It issued a $2.5bn five-year bond priced at 85 bp over US treasuries, and a $2.5bn 10-year bond priced at 125 bp over treasuries. This has set a benchmark for pricing corporate issuance, allowing the firms to go ahead with debt plans.

Abu Dhabi National Energy Company (Taqa) has also invited banks to bid for a role in arranging an international bond issuance, according to Reuters. Taqa has been hit hard by falling oil prices and made a AED1.8bn loss in 2015, down from a loss of AED3bn in 2014. The firm is cutting costs sharply.

Taqa has denied reports it is considering selling assets to other state-owned Abu Dhabi entities.

Bond markets have been subdued in recent months due to high levels of volatility. Issuance is beginning to pick up, with higher pricing expectations.

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