Abu Dhabi Plans First Bond Since 2009 as Oil Curbs Finances

  • Emirate to start fixed-income investor meetings April 19
  • BofA Merrill Lynch, Citigroup, JPMorgan helping with sale

Abu Dhabi, the capital of the United Arab Emirates, is sounding out investors about plans to issue bonds for the first time in more than seven years as the government seeks to bolster its finances against a slumping oil price.

The emirate, holder of about 6 percent of the world’s oil reserves, will hold meetings with fixed-income investors in the U.A.E., Europe and the U.S. starting April 19, according to a person with knowledge of the plan. A sale of dollar-denominated benchmark-sized Regulation S and 144A securities may follow, subject to market conditions, said the person, asking not to be identified because the information is private.

Abu Dhabi is the “highest-quality” credit in the Middle East and demand for the issue will be “strong from both local as well as international investors,” Apostolos Bantis, a credit analyst at Commerzbank AG, said by e-mail from Dubai. “Despite the drop in crude prices, the collapse of the latest oil talks, Abu Dhabi’s new bond issue should manage an attractive price that will set the stage for other government-related entities to follow.”

Abu Dhabi last tapped investors with a bond in April 2009, selling $1.5 billion in 10-year securities, according to data compiled by Bloomberg. The emirate has the third-highest investment-grade rating from Standard & Poor’s. The Abu Dhabi government’s deficit will decline to 11.6 percent of gross domestic product in 2016 from 13.2 percent last year amid oil’s plunge, Fitch Ratings said in a report in February.

Slow Start

A declining oil price is straining government budgets across the Middle East, where energy-exporters including Saudi Arabia, Kuwait and Qatar, ran surpluses before oil began its descent in 2014.

Abu Dhabi’s planned issue should boost the bond market in the six-nation Gulf Cooperation Council, where sales have got off to the slowest start in eight years. Overall sales in the GCC, which includes Saudi Arabia, Qatar and the U.A.E., have declined 35 percent this year to $5.46 billion, according to data compiled by Bloomberg.

Bank of America Merrill Lynch, Citigroup Inc. and JPMorgan Chase & Co. are managing Abu Dhabi’s planned bond sale.

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