Abu Dhabi's $7bn multi-tranche bond offering gets strong investor interest

The order book rose to more than six times the amount raised to a record $45bn, as 90% of demand came from international investors

Despite global economic headwinds, the bond offering was oversubscribed by more than six times. Victor Besa / The National

Abu Dhabi’s $7 billion (Dh25.7bn) multi-tranche international bond offering received strong investor interest despite concerns about the global economy.

“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,” Jassim Al Zaabi, chairman of the Abu Dhabi Department of Finance, said in a statement on Sunday.

“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.”

The bond issuance was oversubscribed more than six times, pushing the order book to $45bn, the highest oversubscription achieved by Abu Dhabi. International investors accounted for 90 per cent of the final orderbook, with the remaining 10 per cent from the Mena region.

Subscription requests from more than 100 new investor accounts reflected confidence in the emirate’s "solid credit fundamentals”, the statement said.

On April 8, the emirate priced its bond offering, which comprised a $2bn five-year tranche, a $2bn 10-year tranche and a $3bn 30-year tranche. The bond deal is part of Abu Dhabi’s medium-term strategy to help it diversify its sources of funding and optimise its capital structure.

The debt profile of Abu Dhabi – rated Aa2 by Moody's Investors Service and AA/A-1+ by S&P – continues to be prudent, underscored by low direct government debt. The emirate has fiscal flexibility and the capacity to add more debt, Mr Al Zaabi said.

“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,” he said.

Sovereigns and quasi-government companies in the region are looking to raise debt to take advantage of the low interest rate environment, as they shore up finances amid lower oil prices and the coronavirus pandemic that has infected more than 2.3 million people globally. Central banks have cut rates to encourage lending as the global economy slips into the deepest recession since the Great Depression of the 1930s.

Despite a challenging global economic backdrop, Abu Dhabi remains the highest priced sovereign from the region, according to the Department of Finance.

BofA Securities, Citi, First Abu Dhabi Bank, HSBC, JP Morgan and Standard Chartered Bank were the joint lead-managers and bookrunners on the deal.

Abu Dhabi, which accounts for about six per cent of the world’s proven oil reserves, last tapped the debt markets in September 2019, when it raised $10bn through a multi-tranche issuance. The deal was more than two-and-a-half times oversubscribed, peaking at $25bn, it said at the time.