Unprecedented demand for UAE’s multi-tranche sovereign bond package

The UAE Government, represented by the Ministry of Finance (MoF), has successfully closed its offering of a US dollar-denominated multi-tranche sovereign bond package. The package comprises 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 US$4 billion.

The announcement was made during a virtual media briefing held by the Ministry of Finance, where Younis Haji Al Khoori, Under-Secretary of MoF, previewed the results of the subscription to the country’s sovereign bonds.

These bonds were priced on 6th October, 2021, and will be settled on 19th October, 2021, with their tranches distributed as follows: the 10-year tranche bonds were sold at US$1 billion at a spread of 70bps over US Treasuries; the 20-year tranche bonds were sold at US$1 billion at a spread of 105bps over US Treasuries, creating a new standard for bond issuers, especially since the United Arab Emirates is the first-ever sovereign to do a US dollar benchmark issuance in the 20-year tenor in the GCC; the dual-listed 40-year Formosa tranche valued at US$2 billion at 3.250 percent. The Formosa bond 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.

Younis Haji Al Khoori pointed out the successful subscription of the three tranches, which achieved the lowest-ever yield for a debut sovereign from the GCC – a testament to the credit strengths of the UAE.

Al Khoori said, “The government bond tranches offered raised US$4 billion, while global books peaked at US$22.5 billion, representing a 5.6x oversubscription. The orderbook momentum increased the deal size to US$4 billion from the initial target of US$3 billion.”

Clarifying the purpose of issuing the bonds, he stated, “The UAE issued these bonds to contribute to the development of the bond market and find investment alternatives for investors.”

Al Khoori 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. “The International Monetary Fund forecasts the UAE’s economy to grow by 3.1 percent in 2021, and the Central Bank of the UAE estimates a 4.2 percent growth in 2022.”

The bonds captured the demand of international and regional investors. Global books peaked at over US$22.5 billion (excluding JLM interest), representing a 5.6 percent oversubscription.

Al Khoori added, “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 key international investors and then followed that up with investor calls following the mandate announcement to discuss and answer their questions. 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.”

The geographic allocation of the 10-year tranche bonds was distributed as follows: 39 percent for investors from the Middle East; 21 percent for American; 20 percent for Asian; 12 percent for UK; and 8 percent for European investors. The geographic allocation for the 20-year tranche bonds was distributed as follows: 43 percent for American investors; 26 percent for Middle East; 18 percent for UK; 9 percent for European; and 4 percent for Asian investors. The geographic allocation of the 40-year dual-listed Formosa tranche was distributed as follows: 71 percent for Asian investors; 10 percent for UK; 9 percent for American; 5 percent for European; and 5 percent for investors from the Middle East.

The final 10-year tranche bonds allocation by type was distributed as follows: 35 percent for banks and private banks; 33 percent for fund managers; 20 percent for pension funds and central banks; and 12 percent for insurance.

The final 20-year tranche bonds allocation by type was distributed as follows: 66 percent for fund managers; 21 percent for banks and private banks; 12 percent for insurance; and 1 percent for pension funds and central banks. As for the 40-year dual-listed Formosa tranche bond, it was distributed as follows: 59 percent for insurance; 23 percent for fund managers; 16 percent for pension funds and central banks; and 2 percent for banks and private banks. The dual-listed Formosa tranche bond will be issued in Nasdaq Dubai, the London Stock Exchange (LSE), Abu Dhabi Securities Exchange and Taipei Exchange. Nasdaq Dubai is expected to confirm the listing on the issue date, while the listing on the Abu Dhabi Securities Exchange (ADX) may follow after the issue date.

The Ministry of Finance authorised Abu Dhabi Commercial Bank PJSC, BofA Securities, Citigroup Global Markets Limited, Emirates NBD Capital, First Abu Dhabi Bank PJSC, HSBC Bank plc, J.P. Morgan Securities plc, Mashreqbank psc, and Standard Chartered Bank to be Lead Managers and Bookrunners to arrange subscription sessions with international investors.

Source: Emirates News Agency

Top