Abu Dhabi returns to debt markets with $5 billion bond sale

Abu Dhabi, capital of the United Arab Emirates, launched $5 billion in three-part bonds as it returned to the debt markets for the fist time in three years, fixed income news service IFR said.

The emirate sold $1.75 billion in five-year bonds at 35 basis points (bps) over US Treasuries (UST), a $1.5 billion 10-year tranche at 45 bps over UST and $1.75 billion in 30-year paper at 90 bps over the same benchmark, IFR said.

Abu Dhabi, which holds more than 90 percent of the UAE’s oil reserves, had $37.8 billion in outstanding bonds as of Dec. 31 2023 and $6.8 billion in loans from local banks, according to an investor presentation seen by Reuters.

Government debt as a percentage of nominal GDP stood at an estimated 15.7 percent at the end of 2023.

Justin Alexander, director at Khalij Economics, said the latest debt sale was unlikely to reflect a need for domestic financing, given Abu Dhabi’s strong fiscal position, although a $3 billion bond matures in September.

“More likely this is about staying connected to the bond market after a three-year absence,” Alexander, also Gulf analyst at GlobalSource Partners, said, adding it could provide indirect financing for external investments by the emirate’s sovereign wealth funds such as ADQ.

Government-related entities had $113 billion in borrowings at the end of last year, the investor presentation said.

Abu Dhabi last tapped debt markets with a $2 billion, seven-year bond in May 2021 followed by a further $3 billion two-part issue the following September.

Like other oil exporters in the region, it has accelerated efforts to diversify non-oil sectors such as tourism, logistics, manufacturing and industry, as part of a transition strategy to secure future economic growth. Abu Dhabi Commercial Bank, Citi, First Abu Dhabi Bank, HSBC, JPMorgan Securities, Morgan Stanley, and Standard Chartered are joint lead managers on the bond issue.