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UAE Launches Multi-Tranche Sovereign Bond Package

UAE Launches Multi-Tranche Sovereign Bond Package

Thursday, 14 October, 2021 - 08:30
Media briefing held by the Ministry of Finance (Asharq Al-Awsat)

The UAE government has successfully closed its offering of a US dollar-denominated multi-tranche sovereign bond package, comprising medium and long-term tranches, including a 10-year tranche, a 20-year tranche, in addition to a 40-year dual-listed Formosa tranche with a total value of $4 billion.

The announcement came during a media briefing held by the Ministry of Finance where the bonds will be settled on October 19, with their tranches distributed as follows: the 10-year tranche bonds were sold at $1 billion at a spread of 70bps over US Treasuries, and the 20-year tranche bonds were sold at $1 billion at a spread of 105bps over US Treasuries.

The dual-listed 40-year Formosa tranche, valued at $2 billion at 3.250 percent, is debt sold in Taiwan by foreign borrowers and denominated in currencies other than the Taiwanese dollar.

The 40-year Formosa tranche achieved the highest ever distribution into Asia for a long-dated US dollar benchmark issuance by a sovereign, with over 70 percent of the bonds placed with Asian investors.

Under-Secretary of MoF Younis al-Khoori said that the government bond tranches offered raised $4 billion, while global books peaked at $22.5 billion, representing a 5.6x oversubscription.

“The orderbook momentum increased the deal size to $4 billion from the initial target of $3 billion.”

He explained that the UAE issued these bonds to “contribute to the development of the bond market and find investment alternatives for investors.”

The official noted that the high demand of investors for these bonds reaffirms the UAE’s strong credit rate and its ability to overcome all crises, foremost of which is the COVID-19 pandemic.

UAE’s economy is predicted to grow by 3.1 percent in 2021 and a 4.2 percent growth in 2022, said Khoori.

The UAE government has not issued any bonds before, but some of the seven emirates have, namely Abu Dhabi and Dubai.

The Ministry of Finance adopted a two-pronged investor engagement strategy whereby it conducted a non-deal roadshow a few weeks back to introduce the credit to vital international investors, announced the official.

“The focused investor engagement strategy was highly successful and helped secure significant early indications of interest, with Taiwanese investors, in particular, coming in with strong demand for the 40-year Formosa tranche, ahead of formally opening the orderbook.”

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