Abu Dhabi raises $5bn from first bond sale in seven years

Abu Dhabi’s sale may rekindle issuance across the six-nation GCC which had the worst start to a year for new debt offerings since 2008.

The emirate of Abu Dhabi has sold US$5 billion in sovereign bonds for the first time since 2009 as Arabian Gulf governments turn to debt markets amid a weaker oil price.

Abu Dhabi’s department of finance sold a $2.5bn tranche of 5-year bonds yielding 2.125 per cent and which mature on May 3, 2021, and another $2.5bn tranche of 10-year bonds yielding 3.125 per cent. Those bonds mature on May 3, 2026, according to market participants.

JP Morgan, Bank of America and Citigroup managed the sale.

The rating agency Fitch said it has assigned Abu Dhabi’s senior unsecured bonds issued under the sovereign’s global medium-term note programme AA ratings. Standard & Poor’s, the biggest rating agency that covers Abu Dhabi as a single emirate, also rates the emirate as AA, the third best investment grade rating after AA+ and AAA.

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

Some 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 by 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.

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