Abu Dhabi raises $4.4bn in bond sale to buy Spanish refinery despite regional unrest

The timing of Abu Dhabi’s first euro and sterling denominated bond issue last week might have been judged unfortunate given the unrest across the region and the declaration of a state of emergency in Bahrain. But the issue was ‘extremely well received’ and three times oversubscribed by 350 investors.

Perhaps Abu Dhabi partly sought to demonstrate that it is still business as usual in the Emirates. $4.4 billion was no mean sum, not that the Abu Dhabi Government needs the money at all. This is simply a financing to improve the internal rate-of-return on this purchase, something like mortgaging a house when you actually have the money available.

Dear money?

Sovereign wealth fund the International Petroleum Investment Company, whose objectives are self-explanatory, will pay 4.875 per cent on five-year euro bonds and 6.8875 on the 15-year tranche.

If it had waited then this funding might have been cheaper but then again bond yields are low by historic standards and waiting could also be expensive.

Last month IPIC agreed to buy out the 53 per cent stake in Cepsa that it did not own, most likely securing a solid, long-term asset at an advantageous price of around four billion euros.

At present oil prices it would take Abu Dhabi less than a month to earn that much in oil revenues but with two-thirds leverage that comes down to a little over a week.