It was no surprise that the $3 billion two-tranche sovereign bonds issued by the UAE be oversubscribed five times their initial target of $1.5 billion, garnering more than $15 billion in orders.
With central banks stepping up their efforts to control inflation, the performance of debt issued by the UAE has exceeded that of its counterparts from developing countries.
Add to that, the UAE Federal Government was rated “AA-” by Fitch and “Aa2″ by Moody’s Investors Service, with a stable outlook for the national economy.
Meanwhile, the country maintained high economic growth, which, according to the UAE Central Bank, is expected to reach 5.4 percent in 2022.
The World Bank forecasted that the UAE’s economy would grow at 4.7 percent this year in its World Economic Outlook released this month, based on the continued development of capital markets, increased labor market flexibility, and a faster pace of technological innovation.
Subscription details
First tranche:
- A 10-year tranche of $1.75 billion, was priced at a spread of 100 basis points (bps) over US Treasuries, with a final coupon rate of 4.05 percent. The tranche will be listed on the London Stock Exchange (LSE) and Nasdaq Dubai.
Second tranche:
- A 30-year Formosa tranche of $1.25 billion was priced at a spread of 175 bps over US Treasuries, with a final coupon rate of 4.951 percent. The tranche will be listed on the LSE, the Taipei Exchange, and Nasdaq Dubai.
Formosa bonds
Formosa bonds refer to debt issued in Taiwan by foreign borrowers in currencies other than the Taiwanese dollar.
The bonds were priced on June 23, 2022, and will be settled on July 7, 2022.
The oversubscription is a “testament to the confidence of investors in the strong credit and stability of the UAE economy”, said Mohamed Al Hussaini, Minister of State for Financial Affairs.
“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,” he added.
Geographic allocation
In terms of geographic allocation, the 10-year tranche bond had 41 percent of its investors from the Middle East, 26 percent from the US, 21 percent from Asia, 5 percent from the UK, and 7 percent from Europe.
The geographic allocation of the 30-year Formosa tranche had 42 percent of its investors from the US, 17 percent from the Middle East, 16 percent from Asia, 16 percent from the UK, and 9 percent from Europe.
The 10-year tranche had 36 percent of its investors from banks and private banks while 50 percent were fund managers, 12 percent were pension funds and central banks, and 2 percent were from the insurance sector.
The 30-year Formosa tranche had 23 percent of investors from the insurance sector while 61 percent were fund managers, 1 percents were pension funds and central banks, and 15 percent were lenders and private banks.
Last year, the UAE raised $4 billion by issuing multi-tranche sovereign bonds, the first time it had accomplished bonds at the federal level.
The dollar bills package included traditional 10- and 20-year tranches, as well as dual-listed 40-year Formosa bonds.
