Abu Dhabi's $10 Billion Offering Lifts 2017 MENA Sales to Record

(Bloomberg) -- Abu Dhabi, whose government has one of the highest investment grades in the Middle East, raised $10 billion in bonds, pushing regional sales to a record.

The sheikdom sold $3 billion of five-year notes, $4 billion of the 10-year tranche and $3 billion of the 30-year offering, people familiar with the matter said, declining to be identified because the information is private. Investors submitted in excess of $30 billion in bids, they said.

The pricing was narrowed by 20 basis points across the board:

• Five-year notes were priced at 65 basis points over U.S. Treasuries
• 10-year tranche at 85 basis points
• 30-year bonds at 130 basis points

The sale takes bond deals from the Middle East and North Africa to a record $89 billion this year, according to data compiled by Bloomberg. Gulf Cooperation Council states, which includes the biggest Arab economy of Saudi Arabia, are selling debt as regional governments seek to bridge budget deficits brought on by low oil prices. The kingdom last week raised $12.5 billion in its second dollar bond offering this year.

Read More: JPMorgan Tops Mideast Bond Deals as Borrowing Binge Sets Record

‘On the Up'

“Local and international demand has definitely been on the up for Middle East issuers,” said Angelo Rossetto, a trader at GMSA Investments Ltd. in London, who subscribed to the offering. “Each new issue has pushed the boat a little further out each time in terms of size.”

The capital of the United Arab Emirates, whose debt carries the third-highest investment grade at S&P Global Ratings, last sold debt in April 2016 with a $5 billion offering, its first in seven years.

The emirate expects to narrow its budget deficit to 1.9 percent of gross domestic product this year, assuming a $50 per barrel oil price, according to a note from Credit Sights published on Monday. Abu Dhabi has $6.5 billion of public foreign debt and no outstanding domestic debt, the note said.

“They certainly could have been a bit more courageous and tried to come out before some of it's neighbors,” Rossetto said. This “with hindsight would have also enabled them to get cheaper financing given the move in Treasuries,” he said. 

Bank of America Merrill Lynch, Citigroup Inc, First Abu Dhabi Bank, HSBC Holdings Plc, and JPMorgan Chase & Co. were the joint lead managers and bookrunners on the deal.

To contact the reporter on this story: Archana Narayanan in Dubai at anarayanan16@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Dana El Baltaji