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The UAE dual-tranche USD dollar bond issuance achieves an oversubscription by 5x

The Federal Government of the United Arab Emirates, represented by the Ministry of Finance, has successfully closed its offering of a U.S. dollar-denominated dual-tranche sovereign bond package, which is comprised of medium and long-term tranches: a 10-year tranche and a 30-year Formosa tranche – with a total value of USD 3 billion, which saw orders in excess of USD 15 billion and the size doubled from initial target of USD 1.5 billion.

These bonds were priced on 23 June 2022, and will be settled on 07 July 2022, with their tranches distributed as follows:

1.   The 10-year tranche bonds size was USD 1.75 billion, priced at a spread of 100 bps over US Treasuries, with final coupon at 4.050%. The 10-year tranche will be listed on London Stock Exchange (LSE) and Nasdaq Dubai.

2.   The 30-year Formosa tranche size was USD 1.25 billion, priced at a spread of 175bps over US Treasuries, with final coupon at 4.951%. The 30-year tranche will be listed on London Stock Exchange (LSE), and Taipei Exchange, and Nasdaq Dubai.

His Excellency Mohamed Bin Hadi Al Hussaini, Minister of State for Financial Affairs pointed out that the successful subscription of the second sovereign bonds is a testament to the confidence of investors in the strong credit and stability of the UAE economy. H.E. Al Hussaini said: “The initial target was a benchmark size of USD 1.5 billion, with global book orders peaking at c. USD 15 billion on an intraday transaction, representing a c. 5x oversubscription; the issuance was upsized to USD 3 billion. Pricing was tightened by 25bps from the initial pricing guidance on both tranches, with final pricing at UST plus 100 bps for the 10-year tenor and UST plus 175 bps for 30-year tenor.

“The New Issue Concession priced into the deal was at the lower end than what the market has generally seen in this elevated volatility, and this is a recognition of the strong credit and the strong leading position the UAE enjoys. This reiterates the country’s creditworthiness and the desire of international investors to take advantage of the multiple safe investment opportunities offered by the robust investment climate of the country.”

H.E Al Hussaini added: “The sovereign bonds contribute to increasing the competitiveness of the UAE across various fields and support the country’s financial and economic policies aimed at achieving inclusive and sustainable development. This is by diversifying sources of income, attracting foreign investments, and building a multi-opportunity investment environment. The Ministry of Finance will continue bolstering the UAE’s financial system and offering innovative financial tools that advance national economic development.”

The Ministry of Finance extends its thanks to the mandated banks, namely: Abu Dhabi Commercial Bank PJSC, Bank of America Securities, Citigroup Global Markets Limited, Emirates NBD Capital, First Abu Dhabi Bank PJSC, HSBC Bank plc, J.P. Morgan Securities plc, Mashreqbank psc, Standard Chartered Bank, and Industrial and Commercial Bank of China.

The geographic allocation of the 10-year tranche bonds was distributed as follows: 41% for investors from the Middle East; 26% for American investors; 21% for Asian investors; 5% for investors from the UK; and 7% for European investors. The geographic allocation of the 30-year Formosa tranche was distributed as follows: 42% for American investors; 17% for investors from the Middle East; 16% for Asian investors; 16% for investors from the UK; and 9% for European investors.

The final 10-year tranche bonds allocation by type was distributed as follows: 36% for banks and private banks; 50% for fund managers; 12% for pension funds and central banks; and 2% for the insurance sector. As for the 30-year Formosa tranche bond, it was distributed as follows: 23% for the insurance sector; 61% for fund managers; 1% for pension funds and central banks; and 15% for banks and private banks.

The Federal Government of the United Arab Emirates is rated AA- by Fitch, and Aa2 by Moody’s, with a stable outlook for the national economy, another testament to the country’s robust financial and economic policies and global leadership position.