UAE federal bank planning second-ever sale of dollar debt

A lender wholly owned by the federal government of the United Arab Emirates is planning to sell its second-ever international bonds as soon as this month, according to people with knowledge of the matter.

Emirates Development Bank, which started operations in 2015 and provides financing to citizens and small- and medium-sized enterprises, could raise $750m or more, the people said, asking not to be identified because the information is private.

The money would go toward supporting companies in sectors considered a priority for the economy, the people said. The bank’s debt is assigned the fourth-highest investment grade from Fitch Ratings, the same as the sovereign.

A spokesperson for EDB declined to comment.

The UAE passed a law in October 2018 allowing the federal government to issue sovereign debt for the first time, enabling its seven emirates to benefit from a higher credit rating and lower borrowing costs.

Emirates Development Bank was the first entity to take advantage of the debt law by selling its first debt in 2019. The government has yet to issue a federal bond for the first time.

The price of global oil benchmark Brent crude has almost doubled since October to over $70 a barrel as major economies vaccinate their citizens and businesses reopen – a boon for the UAE, OPEC’s third-largest producer.

Favourable financing conditions thanks to ultra-low borrowing costs are meanwhile prompting emerging-market sovereigns and state firms to address any funding needs for later this year.

Bahrain, Saudi Aramco and Qatar Petroleum are among issuers from the Gulf region that are wading back into debt markets. Abu Dhabi sold $2bn of dollar bonds in late May, followed by the emirate’s sovereign wealth fund Mubadala Investment Co.