Abu Dhabi said to be planning bond sale

Abu Dhabi is said to be looking at issuing US dollar-denominated bonds in what could be its first sovereign debt raising since 2009, as Arabian Gulf governments find ways to plug deficits created by the massive drop in the price of oil.

Market participants, speaking on condition of anonymity, said the sale, overseen by Abu Dhabi’s department of finance, could easily be more than twice the size of the last such deal, and would sell quickly given the high credit quality of the emirate and scarcity of bonds issued by it in the market.

JP Morgan, Bank of America and Citigroup are said to be managing the sale. The bonds are likely to be sold in tranches of 5-year and 10-year bonds but may include tenors of anything between 3 years and 30 years, the sources said. Standard & Poor’s, the biggest ratings agency that covers Abu Dhabi as a single emirate, rates the emirate an AA, the third best investment grade rating after AA+ and AAA.

The government is also said to be about to embark on a road trip that will take it to Europe and the United States to gauge investor interest.

Abu Dhabi last tapped investors with a bond in April 2009, selling $1.5bn in 10-year securities.

And it is not just the government that has been looking to borrow money. A number of Abu Dhabi government-related entities are said to be exploring finance options from international lenders as sources of funding at home become more expensive.

Corporate borrowing costs are increasing as deposits in banks dwindle and interest rates rise amid the steepest drop in oil prices since 2008.

The price of crude has dropped more than 60 per cent from its high in the middle of 2014.

The state-owned investment firms Aabar and Mubadala, as well as the telecoms operator Etisalat, are said to each be seeking between $2bn and $2.5bn in loans.

Elsewhere in the Gulf, Saudi Arabia has felt the fallout from the drop in oil keenest.

The world’s biggest oil exporter relies more heavily than its neighbours on the sale of oil to finance its budget, with about 90 per cent of it being generated by crude sales.

Saudi Fransi Capital, a Riyadh-based investment bank, expects that Saudi Arabia debt sales may reach $32bn this year.

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