DUBAI: The emirate of Sharjah attracted massive demand at its first international debt sale yesterday, drawing investor orders worth more than ten times the $750m issue.
The strong interest in the issue of ten-year Islamic bonds reflected both investors’ hunger for new Gulf issuers, and the view that oil-rich Abu Dhabi, the biggest of the seven members of the United Arab Emirates, will support the others if needed.
“The demand is a reflection of the likely scarcity value of the deal, and the strong proven economic and political backstop provided by Abu Dhabi/UAE federal authorities for the various emirates,” said Raza Agha, emerging market sovereign debt analyst at VTB Capital in London. About $7.85bn of orders poured in for the sukuk ijara from 250 investors, as pricing was tightened to 110 basis points over midswaps. The issue priced at a profit rate of 3.764 percent. Demand for the Sharjah sukuk was so heavy that it priced inside the Dubai government’s $750m, January 2023 sukuk, which was trading at a Z-spread of 139 bps yesterday — despite very bullish market sentiment towards Dubai because of its economic boom.
The fact that Dubai does not have a credit rating limits interest in its bonds among some investors. But the Sharjah bond, rated A3 by Moody’s Investors Service, also compared well with Abu Dhabi bonds.
The Sharjah issue priced in line with the 2023 bonds of one of Abu Dhabi’s top state-owned firms, Abu Dhabi National Energy Co (TAQA), which are also rated A3. Those bonds were trading at a Z-spread of 109 bps yesterday.
Half of the Sharjah issue was allocated to investors from the Middle East, while British-based investors took 20 percent, the rest of Europe 11 percent and Asia 14 percent, the emirate’s government said. “The issuance will provide a benchmark for any transactions undertaken by Sharjah entities in both the wider public sector and the private sector,” the Sharjah Finance Department said. “It will also enhance the efforts of the UAE authorities to develop the local financial markets.” Reuters
