Abu Dhabi in talks with banks for new debt issuance: sources

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DUBAI (Reuters) – Abu Dhabi is in talks with banks over a possible sale of debt in international markets this year, as the oil-rich emirate plans to engage global fixed-income investors more regularly in a context of low oil prices, sources said.

Abu Dhabi, which has one of the best credit ratings in the region, issued its last international bonds in September last year, raising $ 10 billion for budgetary purposes and generating nearly $ 20 billion in demand. .

After a reshuffle of its finance department last year, the government is in talks with banks over several fundraising options, taking a more proactive approach to debt financing, the sources said.

“They want to issue more regularly and in smaller sizes, rather than huge $ 10 billion deals like last year,” one said.

“As part of its mandate, the Abu Dhabi finance ministry is constantly evaluating options under the existing bond issuance program,” he told Reuters in an emailed statement.

“However, for political reasons, the department is not responding to market rumors,” he added.

Rated AA by S&P and Fitch and Aa2 by Moody’s, Abu Dhabi’s finances are backed by one of the world’s largest sovereign net foreign asset positions and low leverage.

But its ratings are also limited “by reliance on volatile oil and gas revenues, an underdeveloped economic policy framework, and weak governance indicators relative to its ‘AA’ peers,” said Cedric Berry, associate director at Fitch Ratings.

In discussions with banks, Abu Dhabi said it plans to modernize its approach to fundraising and improve transparency when engaging with fixed income investors, one of the officials said. sources.

“They want to pay less for their loans. They’re rated double A, but they’re paying 10-15 basis points more than their peers and they want to fix it.

Abu Dhabi’s fiscal balance depends almost entirely on revenues from hydrocarbon royalties and taxes and dividends received from ADNOC, its national oil company.

After the collapse of oil prices in 2014 and 2015, he cut government spending and increased dividends from public entities. However, he had forecast a deficit of 27.2 billion dirhams (7.41 billion dollars) for 2019, according to his latest bond prospectus.

Abu Dhabi, the capital of the United Arab Emirates, is also the largest contributor to the federal government budget, with contributions expected to account for 40% of the emirate’s spending last year.

The UAE government – which passed a law in 2018 allowing it to issue debt at the federal level – plans to sell federal bonds for the first time in 2020, an official said last year.

Last year, Emirates Development Bank, owned by the federal government of the United Arab Emirates, sold $ 750 million in bonds, becoming the first federal entity to tap international capital markets under the new law on debt.

($ 1 = 3.6730 UAE dirhams)


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