Aabar launches 750m bond issue redeemable for Daimler shares

Tuesday, May 24, 2011

Dubai Aabar Investments yesterday announced the launch of €750 million (Dh3.88 billion) bonds exchangeable for shares of Daimler AG.

Aabar’s commitment to its investment in Daimler remains unchanged, the company said in a statement. Aabar, which delisted from the Abu Dhabi bourse last year, bought its Daimler stake in March 2009 for around $2.7 billion.

“The five-year notes will pay a coupon of 3.5 per cent to 4 per cent and can be handed over for stock in the Germany-based carmaker when the shares rise 30 per cent from the current market price,” a statement from Aabar said.

The final terms of the issue have yet to be determined and settlement is expected to take place on or about May 27.

Aabar has retained the option of settling the sec-urities in cash. The deal is being managed by Bank of America Merrill Lynch, Deutsche Bank AG and Morgan Stanley.

Based on the announced issue size of €750 million, the bonds are expected to represent approximately 12.2 million Daimler shares or 1.1 per cent of the current total number of issued and outstanding Daimler shares.

If not previously exchanged or redeemed, the bonds will be redeemed at par five years from the settlement date.

Upon exchange, Aabar will have the flexibility to settle in cash, deliver the underlying Daimler shares or a combination of both.

As part of the offering, Aabar has entered into some derivative transactions to hedge its commitment to deliver Daimler shares in exchange for the bonds at their maturity.

“Thus the derivative counterparty is expected to purchase Daimler shares which may result in significant volumes of trading in the Daimler shares,” Aabar statement said.

Analysts said yesterday that in the context of the regional political turmoil and the fiscal instability in Europe, some of the Gulf markets such as Qatar, the UAE and Saudi Arabia have emerged as a safe haven for international fixed income investors and this has triggered a number of bond issues.

“There has been a significant increase in demand for regional papers from overseas investors.

We have witnessed a phenomenal recovery in Dubai debt, additionally the flight to quality as a result of the regional turmoil is helping some of the regional markets. We expect more issuers to utilise this window of opportunity to issue bonds,” said Abdul Kadir Hussain, Chief Executive of Mashreq Capital.

“Aabar is clearly taking advantage of the current market conditions and we are likely to see more issues in the week ahead,” said Rod Ringrow, senior executive officer, State Street Middle East North Africa LLC.

$2.7b

value of stake bought by Aabar in March 2009

12.2m

number of shares to be  represented in bond issue

investment

factfile

Growing portfolio

Aabar is an investment company headquartered in Abu Dhabi with investments around the world.

By Babu Das Augustine?Deputy Business Editor