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Abu Dhabi Sells $10 Billion, Tapping Demand for Quality Bonds

Andrew Monahan, Netty Ismail, Archana Narayanan and Sydney Maki
Abu Dhabi Sells $10 Billion, Tapping Demand for Quality Bonds

(Bloomberg) -- Abu Dhabi sold $10 billion of bonds in a three-part deal in its first international offering in two years as it takes advantage of relatively low borrowing costs.

The oil-rich emirate sold $3 billion of five-year fixed notes, $3 billion of notes due 2029 and $4 billion of 30-year notes. The sovereign -- which boasts the third-highest grade from Moody’s Investors Service and S&P Global Ratings -- didn’t need to offer an extra premium to its yield curve to attract investors.

The emirate is taking advantage of investor demand for high-quality debt amid concern about the U.S.-China trade war and slowing global growth. Its credit rating is among the strongest in the Middle East and Africa, and the cost to insure its debt against default is the lowest in the region.

“With a fortress-like balance sheet, they can afford to come to market at minimal or no concession,” Patrick Wacker, a fund manager for emerging-market fixed income at UOB Asset Management Ltd. in Singapore, who bought the bonds to diversify his investments. “We like the sovereigns’ very strong fundamentals.”

Still, Abu Dhabi paid an additional yield premium of around 10 basis points on its bond due September 2024 compared with Qatari debt maturing in March of the same year. The gas-rich nation is rated one level lower than Abu Dhabi by the three major rating companies.

The spread for the 2029 notes was about 20 basis points higher than South Korean securities, which, like Abu Dhabi’s notes, are rated Aa2 by Moody’s.

(Updates with comparison of bond pricing in second and fifth paragraphs.)

--With assistance from Carolina Wilson and Nikolaj Gammeltoft.

To contact the reporters on this story: Andrew Monahan in Hong Kong at amonahan@bloomberg.net;Netty Ismail in Dubai at nismail3@bloomberg.net;Archana Narayanan in Dubai at anarayanan16@bloomberg.net;Sydney Maki in New York at smaki8@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, ;Claudia Maedler at cmaedler@bloomberg.net, Stefania Bianchi

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