Abu Dhabi set to issue first eurobonds since 2021

Abu Dhabi is making its return to the eurobond market after a three-year hiatus, as expectations for an imminent decrease in US interest rates begin to wane, Bloomberg reports. The emirate, which holds a AA rating or equivalent from all three major ratings agencies, is issuing USD-denominated bonds with maturities of five, 10, and 30 years in its first issuance since 2021, Bloomberg says, citing a person familiar with the matter. Information about the size of the offering and the final terms were not publicly available.

Background: Abu Dhabi has been eyeing a fresh eurobond issuance for some months, Bloomberg reported in February, joining a “flurry” of debt issuances from emerging economies. While the emirate is not in need of new funding, Bloomberg suggested at the time the goal of the move is for the emirate to “boost the liquidity of its existing debt.”

The details: Initial indications suggest the five-year bonds will be priced at about 70 basis points (bps) above their counterpart US Treasuries, the 10-year at 85 bps above, and the 30-year tranche at 125 bps above. Making the offering at a higher spread than its US counterparts serves as an incentive for fixed-return investors.

No room for arbitrage: The AED is begged against the USD, making it unlikely for Abu Dhabi to be able to issue an offering priced at lower spread than that offered by US counterparts.

ADVISORS- The bond sale is being managed by Abu Dhabi Commercial Bank, Citigroup Inc., First Abu Dhabi Bank, HSBC Holdings, JPMorgan Chase & Co., Morgan Stanley, and Standard Chartered.