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Abu Dhabi Plans Dollar Bond Issue

Abu Dhabi Plans Dollar Bond Issue

Monday, 2 September, 2019 - 06:30
US dollars are counted out by a banker in a file photo. REUTERS/Rick Wilking

Abu Dhabi plans to issue US dollar-denominated bonds this year, three sources familiar with the matter said, its first since 2017, as the emirate seeks to take advantage of low rates to offset the impact of falling oil prices.

The government has updated its bond program documentation and plans to raise the financing before the end of the year, one of the sources told Reuters, adding that a bond deal of at least $1 billion was likely.

Abu Dhabi’s Department of Finance did not immediately respond to a request for comment.

Governments in the Gulf Cooperation Council region have borrowed billions of dollars globally over the past few years to refill state coffers hit by lower oil prices.

The new issue is not tied to any specific project and will be used for general budgetary purposes, said the first source.

Abu Dhabi, the capital of the United Arab Emirates (UAE), has the biggest hydrocarbon reserves among UAE’s seven emirates and its fiscal position is among the strongest in the region.

It is investing billions of dollars in industry, tourism and infrastructure to diversify its economy away from the oil sector, from which it derives 50 percent of its real GDP and more than 90 percent of central government revenues, according to S&P.

Given lower global interest rates and constraints on hydrocarbon production due to the re-imposition of the Organization of the Petroleum Exporting Countries (OPEC) production cuts late last year, “it makes sense for Abu Dhabi to build a war chest against lower oil prices”, a second source said.

Abu Dhabi was last in the debt markets in 2017 when it raised $10 billion through a triple-tranche debt issue that attracted heavy demand. That deal was arranged by Bank of America Merrill Lynch, Citi, First Abu Dhabi Bank, HSBC and JP Morgan.

Late last year, when oil prices dropped below $60 per barrel, government representatives met global investors in a so-called non-deal roads how to discuss financing options, sources told Reuters at the time.

On Friday, Brent crude futures fell 65 cents, or 1.1 percent, to settle at $60.43 a barrel.

Abu Dhabi in April repaid $1.5 billion in 10-year bonds it had raised as part of a $3 billion issuance in 2009. The remaining $1.5 billion was repaid in 2014.

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