UAE set to issue its first federal bond

FIRST TIME UAE AS AN ENTITY IS TAPPING GLOBAL MARKETS

The UAE government is to issue its first ever federal government bond, according to banking industry sources. Although the size and tenure of the debut issue is not clear, bankers indicated that there will be a dual tranche dollar denominated issuance that will mature in 10 years and 20 years, respectively.

A Bloomberg report yesterday said there will also be a 40-year dual listed Formosa bond — debt issued in Taiwan and denominated in a currency other than the New Taiwan Dollar.

At the federal level, this is the first UAE government bond issuance although individual emirates have their own government bond programmes. The federal government bond’s issuance follows the UAE government’s 2018 law permitting the federal government to begin issuing sovereign debt. Abu Dhabi Commercial Bank, BofA Securities, Citigroup Inc., Emirates NBD Capital, First Abu Dhabi Bank, HSBC Holdings Plc, JPMorgan Chase & Co., Mashreqbank and Standard Chartered Bank are managing the UAE bond sale.

Why have a federal sovereign bond sale?

The UAE has been planning the issuance of federal government bonds for the past several years. A federal government bond programme will create a benchmark for other government, semi-government, and corporate issuers in the country.

Bankers said the UAE’s federal government bond issuance comes at a time when global interest rates are the lowest and the UAE enjoys substantial credit strength to sell the bonds at an attractive price.

Quoting the transaction document, rating agency Moody’s said that the payment obligations associated with notes issued under the programme will be direct, unsecured obligations of the UAE Government and rank pari passu (at par) with all its other unsecured and unsubordinated obligations.

The government intends to use the net proceeds from each issuance for general budgetary purposes in compliance with its public debt strategy, including the financing of infrastructure projects and investment by the Emirates Investment Authority, according to Moody’s.

Moody’s has assigned a foreign currency senior unsecured programme rating of (P) Aa2 to the Government’s global medium-term note programme.