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Mubadala to test debt appetite with bond sale

Dubai, April 5, 2011

Abu Dhabi fund Mubadala will test international demand for Gulf debt in the midst of regional political upheaval when it begins investor meetings in London on Wednesday ahead of a potential bond issue.

Government-owned Mubadala, which has stakes in AMD, General Electric, and private equity firm Carlyle, announced roadshows last month in Europe, Asia, the United Arab Emirates and the United States.

It would become the second Abu Dhabi entity to tap international capital markets this year after International Petroleum Investment Co (IPIC) issued $4.3 billion equivalent in sterling and euro-denominated bonds in March.

An issue from oil exporter Abu Dhabi, largely shielded from political unrest in the region and benefiting from rising oil prices, is likely to attract investors - at the right price.

'Mubadala is a name investors are familiar with and depending on the pricing, any potential issue should be met with strong demand,' said Chavan Bhogaita, head of markets strategy department at National Bank of Abu Dhabi.

'Furthermore, Mubadala is firmly in the stable of elite Abu Dhabi GRE's (government-related entities) and hence investors are comfortable with the probability of government support in the event of need.'

One London-based fund manager said early discussions had included a 10-year benchmark dollar-denominated deal, with a potential size of $1 billion.

'The good news is Abu Dhabi has had a huge unexpected boost to its revenue stream and confidence is high. But one thing they have to recognise is that spreads on the Mubadala issue need to relate to the alternatives out there,' the fund manager said speaking on condition of anonimity.

'If IPIC debt is available for instance and easy to get hands on, the attraction of owning Mubadala at tighter spreads will be limited.'

In March, a senior executive at the company said there was a 'definite possibility' of a benchmark bond in 2011. Benchmark is usually understood to mean a minimum of $500 million.

The company has played a key role since the financial crisis in supporting GREs to restructure debt and keep them afloat, and has stepped in to help bailouts of property developer Aldar Properties and district cooling firm Tabreed. It has also been reported that the company has offered to buy a stake in state-owned Dubai Aluminium.

Mubadala tapped global debt markets in 2009 with a dual-tranche $1.75 billion issue, currently trading at about 50 basis points over the Abu Dhabi sovereign bond, also due 2014. It priced a 20-year 15 billion yen ($184.7) bond in March at par.

Barclays Capital, HSBC, Standard Chartered, Societe Generale CIB and National Bank of Abu Dhabi are arranging the investor meetings, which run until April 12.-Reuters




Tags: abu dhabi | investment | Mubadala | finance | sovereign wealth fund |

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