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Abu Dhabi’s TAQA sells $1.5B in bonds

TAQA sells $750 mln 5-year bonds, $750 mln 10-year; New TAQA issues used to refinance existing debt; Order books over $8 billion -market source; Existing bonds sell off after guidance released

December 6, 2011 10:36 by

State-run Abu Dhabi National Energy Co (TAQA) on Monday sold $1.5 billion in bonds maturing in five and 10 years to refinance upcoming debt.

The company issued $750 million in five-year bonds paying a premium of 330 basis points over comparable U.S. Treasuries, and an equal amount of 10-year paper at a spread of 390 basis points over Treasuries, Thomson Reuters’ IFR reported.

In a sign of strong investor demand, the pricing came at the tighter range of a downwardly revised guidance of 335 basis points and 400 basis points for the bonds maturing in five and 10 years, respectively.

The five-year tranche had a reoffer price of 99.5020 and a coupon of 4.125 percent. The 10-year tranche had a reoffer price of 99.5150 and a coupon of 5.875 percent.

TAQA, which is 75 percent owned by the government of Abu Dhabi, last month said it would buy back a $1.5 billion bond maturing October 2012 and enlisted four banks to sell new debt.

“To me it is sensible what issuers are doing. They are taking advantage of a window that is there, created by some optimism regarding the European debt situation,” said Luz Padilla, emerging markets fixed income fund portfolio manager at Los Angeles-based DoubleLine.

“They offered a decent spread concession and that is enticing people before year end.”

The leaders of France and Germany on Monday agreed a master plan to impose budget discipline across the euro zone, ahead of a meeting of European Union leaders in Brussels on Thursday and Friday.

Given that the latest chapter in the crisis is not written yet, debt issuers are taking advantage of whatever remaining liquidity there is in the market before year end.

TAQA is a regular issuer of debt in global markets and benefits from implicit backing from the Abu Dhabi government as one of its strategic firms. Abu Dhabi holds over 90 percent of the UAE’s oil reserves.

“As a government-controlled investment entity, and as a provider of the bulk of power and water to the Emirate, it is pivotal to the viability of the UAE. It also has extensive international investments,” said John Bates, head of fixed income at asset manager Silk Invest.

TAQA’s existing bonds fell after the guidance was released as investors made room for the new issue.

TAQA’s $500 million 6.165 percent 2017 maturity yield 4.51 percent on Monday, up from 4.42 percent on Friday, according to Reuters data. The yield on its $1 billion 2016 maturity carrying a coupon of 5.875 percent rose to 3.974 percent on Monday from 3.682 percent on Friday.

Bank of America, RBS, Standard Chartered and Mitsubishi UFJ are arranging the deal.

Last week, Qatar printed a $5 billion bond in a three-tranche deal making it the biggest issue from the region this year.

Like Qatar, TAQA is also listing the offering as a Reg S/144a deal which makes it open to institutional U.S. investors.

“Abu Dhabi and Qatari credits are much sought-after, even when the global pictures looks volatile,” Silk Invest’s Bates said. (Reporting by Rachna Uppal and Stanley Carvalho; additional
reporting by Christopher Reich and Daniel Bases in New York; Editing by Mark Potter, James Dalgleish, Dan Grebler, Leslie Adler)

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