UAE begins selling first US dollar bonds

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General view of Abu Dhabi, United Arab Emirates, January 3, 2019. REUTERS / Hamad I Mohammed / File Photo

DUBAI, Oct. 6 (Reuters) – The United Arab Emirates began marketing a US dollar-denominated three-tranche bond on Wednesday, the first federal government, non-individual-emirate bond to be closed on the same day supposed to show a document.

The bonds have tranches of 10, 20 and 40 years. The 10-year bonds were offered with an initial price forecast of around 105 basis points (bps) above US Treasuries, the 20-year at around 135 bps above the same benchmark, and the 40-year at around 3.6%.

The 40-year portion is Formosa bonds, which are debt securities sold in Taiwan by foreign borrowers and denominated in currencies other than the Taiwanese dollar.

The UAE Treasury Department is expected to raise between $ 3 billion and $ 3.5 billion, two sources familiar with the matter told Reuters. Continue reading

The federal government has never issued bonds before, but several of the seven emirates it comprises, most notably the capital city of Abu Dhabi and the commercial hub of Dubai.

“The price concerns are around 40 basis points further than the extrapolated state curve for Abu Dhabi,” said a bond strategist.

“You will likely land about 10 basis points wider than Abu Dhabi. Given the debut, I expect there will be a new emissions premium.”

Moody’s has assigned UAE bonds an Aa2 rating in line with Abu Dhabi’s, “backed by the assumed full support of the Abu Dhabi government and its strong balance sheet”.

Fitch Ratings gave the UAE an AA- (minus), which reflects “the likelihood of support from Abu Dhabi (AA / stable) if necessary”.

The proceeds will be used to fund cabinet-approved infrastructure projects and support investments by the Emirates Investment Authority, the United Arab Emirates’ only sovereign wealth fund.

Reporting by Davide Barbuscia and Yousef Saba; Editing by Clarence Fernandez and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.


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