Abu Dhabi Raises $5 Billion From First Bond Sale in Seven Years

  • Five-year securities pay coupon of 2.125%, 10-years 3.125%
  • Money raised will be used to fund $10 billion budget deficit

Abu Dhabi, holder of about 6 percent of the world’s oil reserves, raised $5 billion from its first bond sale in seven years as it seeks funds to plug a budget deficit left by crude’s plunge.

The emirate, capital of the United Arab Emirates, raised $2.5 billion from five-year notes that were priced at 85 basis points over similar maturity U.S. Treasuries, a person with knowledge of the deal said late Monday. It raised an identical amount from 10-year bonds that were priced at 125 basis points over Treasuries, said the person, asking not to be identified because the information is private. 

The oil-price decline is straining government budgets across the Middle East, where energy-exporters including Saudi Arabia, Kuwait and Qatar, ran surpluses before crude began its descent in 2014. Abu Dhabi will post a budget deficit of 36.9 billion dirhams ($10 billion) this year if oil averages $40, up from an estimated 32.4 billion dirhams in 2015, according to its bond prospectus.

Abu Dhabi’s sale may rekindle issuance across the six-nation Gulf Cooperation Council which had the worst start to a year for new debt offerings since 2008. Before Abu Dhabi’s sale yesterday, bond sales in the region, which includes Saudi Arabia, the biggest Arab economy, and Qatar, declined 33 percent this year to $6.26 billion, according to data compiled by Bloomberg. Sales were up 27 percent to $11.8 billion after yesterday’s offering.

The sheikhdom, whose debt carries the third-highest investment grade at Standard & Poor’s, previously tapped the market in April 2009, selling $1.5 billion in 10-year securities. Bank of America Merrill Lynch, Citigroup Inc. and JPMorgan Chase & Co. managed Abu Dhabi’s sale.

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