Mubadala Development Company said it raised US$1.5 billion via a two-part international bond sale earlier this week, which will be one of its last financing before it officially merges with International Petroleum Investment Company (Ipic) in May.
Mubadala is an Abu Dhabi government-owned strategic fund charged with making investments that will further the emirate’s economic development. It sold $850 million of bonds maturing in seven years and another $650m bonds maturing in 12 years, to “a diversified international investor base, [after being] greater than three times oversubscribed … at very competitive price”.
Mubadala is considered by bond rating agencies to have the implicit backing of the government and carries an “investment grade” rating parallel to that of its parent of AA/Aa2. The company said the seven and 12-year bonds carried annual interest rate coupons 3 per cent and 3.75 per cent, respectively.
It did not say at what price they were sold, but typically underwriters buy them at a couple of points discount to par and then sell them on to pension funds and similar institutions.
Mubadala first sold bonds in 2009 and returned to the international bond market last May with a $500m issue.
When the merger was announced in June, Mubadala had outstanding debt of nearly $12bn, about $2.6bn of which was in bonds. Ipic had $30bn debt, of which about $6.5bn was bonds. Ipic bonds have paid a slightly higher interest rate than Mubadala’s despite both being government-owned. The new entity, which will be called Mubadala Investment Company, will have total assets of about $125bn. The merger of their finance departments and setting a new debt management strategy will take about a year.
The new merged entity is likely to have lower reliance on external funding as Ipic’s positive cash flow – which has been running at an annual $3bn to $5bn – will meet some of Mubadala’s future funding needs.
Its positive cash flow has typically been about half Ipic’s, requiring less debt, said Anita Yadav, the head of fixed-income research at Emirates NBD.
Six banks shared the underwriting/sales duties for Tuesday’s bond offering: Barclays, HSBC, Natixis, National Bank of Abu Dhabi (now known as First Abu Dhabi Bank), SMBC Nikko and Standard Chartered.
amcauley@thenational.ae
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