UAE's $1.5 billion sovereign bond five times oversubscribed

Strong domestic, regional and international demand shows country's 'increasing attractiveness to foreign investors'

The latest issuance comes after $3 billion was raised in June 2022. Photo: ADX
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The UAE's first US dollar-denominated sovereign bond offering in more than a year was oversubscribed by five times, the Ministry of Finance has said.

The $1.5 billion bond, the first issuance by the federal government since June 2022, attracted more than $7.4 billion in bids, with strong demand from domestic, regional and international investors, reflecting the country’s “increasing attractiveness to foreign investors”, the ministry said.

Of the investors, 45 per cent were from the Middle East, 21 per cent from the US, 14 per cent from Europe, 11 per cent from Asia and 9 per cent from the UK.

About two third of the allocation was for banks and private lenders, a third for fund managers, 4 per cent for pension funds and central banks and 3 per cent for the insurance sector.

The 10-year bond matures in September 2033 and has a yield of 4.917 per cent, with a spread of 60 basis points over US Treasuries. The bond will be listed on the London Stock Exchange and Nasdaq Dubai.

“The successful completion of another sovereign bond by UAE is a testament that UAE remains an attractive destination for investors and one of the world’s most attractive investment hubs,” said Mohamed Al Hussaini, Minister of State for Financial Affairs.

“The UAE has yet again achieved strong results in its recent bond offering, attracting strong and diversified investor demand.”

The June 2022 UAE bond issuance saw the Emirates raise $3 billion and receive more than $15 billion in orders.

The first time the UAE issued federal level bonds was in 2021, when it raised $4 billion.

Joint lead managers and bookrunners on the current bond include Abu Dhabi Commercial Bank, BNP Paribas, Citigroup, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Goldman Sachs, Mashreq Bank and Mizuho.

The bond has an investment grade rating of AA- from Fitch and Aa2 from Moody’s Investors Service, in line with the credit rating of the UAE government, which is among the highest in the world.

The UAE economy grew 3.8 per cent on an annual basis in the first quarter of this year, boosted by a strong non-oil sector, extending the momentum of its 7.9 per cent expansion in 2022, its biggest in nearly 11 years.

The UAE's economy is forecast to expand by 3.3 per cent this year, reflecting oil production cuts agreed by Opec+ members, said the Central Bank's latest Quarterly Economic Review.

Business activity in the UAE’s non-oil private sector also strengthened last month, with the year-ahead sentiment among those surveyed reaching its highest level since March 2020, as output rose sharply and businesses registered their most rapid reduction in delivery times in more than four years.

The seasonally adjusted S&P Global purchasing managers’ index reading of the Arab world's second-largest economy came in at 55 in August, well above the neutral 50-point mark that separates growth from contraction.

Strong reform efforts under the UAE 2050 strategies and advanced progress in comprehensive economic partnership talks will boost trade and integration in global value chains and attract further foreign direct investment, the International Monetary Fund said.

Updated: September 19, 2023, 7:14 AM