UAE's $3bn sovereign bonds five times oversubscribed

Initial target was a benchmark size of $1.5bn, with global book orders peaking at $15bn before the issuance was upsized

Abu Dhabi, United Arab Emirates - March 01, 2019: The UAE flag is replaced by a new one as the wind blows strong in Abu Dhabi. Friday the 1st of March 2019 at Emirates Palace, Abu Dhabi. Chris Whiteoak / The National
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Dual-tranche $3 billion sovereign bonds issued by the UAE were five times oversubscribed, receiving more than $15bn in orders, after the size was doubled from an initial target of $1.5bn, the Ministry of Finance has said.

A 10-year tranche of $1.75bn, was priced at a spread of 100 basis points (bps) over US Treasuries, with a final coupon rate of 4.05 per cent. The tranche will be listed on the London Stock Exchange (LSE) and Nasdaq Dubai, the ministry said late on Thursday.

A 30-year Formosa tranche of $1.25bn was priced at a spread of 175 bps over US Treasuries, with a final coupon rate of 4.951 per cent. The tranche will be listed on the LSE, the Taipei Exchange and Nasdaq Dubai.

Formosa bonds refer to debt issued in Taiwan by foreign borrowers in currencies other than the Taiwanese dollar.

The bonds were priced on June 23, 2022, and will be settled on July 7, 2022, the ministry said.

The oversubscription is a “testament to the confidence of investors in the strong credit and stability of the UAE economy”, said Mohamed Al Hussaini, Minister of State for Financial Affairs.

“This reiterates the country’s creditworthiness and the desire of international investors to take advantage of the multiple safe investment opportunities offered by the robust investment climate of the country.”

In terms of geographic allocation, the 10-year tranche bond had 41 per cent of its investors from the Middle East, 26 per cent from the US, 21 per cent from Asian, 5 per cent from the UK and 7 per cent from Europe.

The geographic allocation of the 30-year Formosa tranche had 42 per cent of its investors from the US, 17 per cent from the Middle East, 16 per cent from Asia, 16 per cent from the UK and 9 per cent from Europe.

The 10-year tranche had 36 per cent of its investors from banks and private banks while 50 per cent were fund managers, 12 per cent were pension funds and central banks, and 2 per cent were from the insurance sector.

The 30-year Formosa tranche had 23 per cent of investors from the insurance sector while 61 per cent were fund managers, 1 per cent were pension funds and central banks, and 15 per cent were lenders and private banks.

The bonds will support the country’s financial and economic policies that aim to achieve inclusive and sustainable development by diversifying sources of income, attracting foreign investment and advancing national economic development, Mr Al Hussaini said.

The UAE Federal Government is rated “AA-” by Fitch and “Aa2" by Moody’s Investors Service, with a stable outlook for the national economy.

“Aa2" is the third-highest long-term credit rating that Moody's assigns to fixed-income securities such as government bonds, denoting their low credit risk.

The mandated banks were Abu Dhabi Commercial Bank, Bank of America, Citigroup, Emirates NBD, First Abu Dhabi Bank, HSBC, JP Morgan, Mashreq Bank, Standard Chartered and the Industrial and Commercial Bank of China.

The UAE raised $4 billion last year through the issuance of multi-tranche sovereign bonds, marking the first time it issued bonds at a federal level.

The dollar bond package included conventional medium and long-term tranches with 10-year and 20-year tenures, as well as 40-year Formosa bonds that are a dual-listed.

The UAE plans to issue more dollar-denominated bonds in 2022, Younis Al Khoori, Undersecretary in the Ministry of Finance, said last year.

Individual emirates are also free to issue debt to meet their own needs, he said.

The UAE's economy is forecast to grow by 6 per cent this year on stronger oil sector growth, according to Abu Dhabi Commercial Bank.

The Arab world's second-largest economy is expected to record 3.4 per cent growth in its non-oil gross domestic product in 2022.

Updated: June 24, 2022, 5:06 AM