- Issuance leverages favorable market conditions as part of Abu Dhabi’s proactive debt management strategy
- Lowest yields ever achieved in GCC on each of the three tranches with unprecedented pricing inside Abu Dhabi’s yield curve
- Oversubscribed and high-quality investor order book peaked at USD 21 billion
Abu Dhabi: The Emirate of Abu Dhabi on 19th May 2020 successfully reopened its recent multi-tranche international bond offering with a USD 3 billion tap issue, which attracted strong investor interest demonstrating confidence in the strength and resilience of the economy of Abu Dhabi. The bond tap capitalized on favorable debt market conditions, achieving the lowest yields ever in in the GCC on each of the three tranches, which comprised: a USD 1 billion 5-year tranche, a USD 1 billion 10-year tranche, and a USD 1 billion 30-year tranche.
The tap issue is a continuation of Abu Dhabi’s USD 7 billion bond issuance, which was successfully completed in April 2020 at an oversubscription level of 6.3, underlining exceptional demand for sovereign bonds by the Emirate. The success of Abu Dhabi’s first ever bond tap, at an oversubscription level of 7 times served as a potent demonstration of the Emirate’s proactive debt management strategy, which is focused on capital structure optimization.
The Emirate maintains conservative levels of debt, with total Government debt at 12.1% of GDP at the end of 2019, which is amongst the lowest in the world and is testament to the Emirate’s prudent fiscal and debt management policies. The 30-year bonds were particularly well received by international investors, who accounted for 98% of the final geographical allocation in this tranche, showcasing trust in Abu Dhabi’s ability to deliver sustained, long-term economic growth. Abu Dhabi remains the only AA rated sovereign in the region.
The Emirate’s net asset position, which exceeds 200% of GDP despite the recent oil price decrease, ensures that Abu Dhabi continues to be in a strong position to leverage market windows.
Commenting on the offering, His Excellency Jassim Mohammed Buatabh Al Zaabi, Chairman of the Abu Dhabi Department of Finance, said: “Abu Dhabi’s economy remains comfortably cushioned from external shocks, including oil price volatility and the repercussions of COVID-19. Despite pandemic-induced market turbulence, we are in a unique position of strength due to our resilient balance sheet, which is underpinned by modest levels of debt and a solid asset base, including two of the world’s largest sovereign wealth funds.”
His Excellency continued: “We are appreciative of the continued trust of our investors, which is testament to our solid credit fundamentals and proven aptitude for sustaining economic growth. The success of the tap sale and the historic low yields achieved, particularly amidst ongoing macroeconomic headwinds, speaks for the success of our prudent fiscal strategy, which has enabled us to maintain low direct Government debt. Abu Dhabi has the capacity to strategically add debt when an opportunity to capitalize on favorable market conditions presents itself, and we will continue to leverage such windows as part of our mandate to safeguard the wealth of the Emirate.”
The proceeds of the tap issue will allow Abu Dhabi to accelerate non-hydrocarbon sector growth with a view to building a resilient, sustainable post-COVID-19 economy in line with the Abu Dhabi Economic Vision 2030.
The tranches priced at 135 basis points over US Treasuries for 5-year bonds, 150 basis points over US treasuries for 10-year bonds, and 182.9 basis points over US Treasuries for 30-year notes.
BNP Paribas, First Abu Dhabi Bank, J.P. Morgan, and Standard Chartered were Joint Lead Managers and Joint Bookrunners.
© Press Release 2020
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