ABU Dhabi state oil giant Adnoc kicked off its debut bond sale on Wednesday (Sep 4) that could raise up to US$5 billion more than two and a half years after it set up a debt-issuing entity and held investor meetings ahead of a potential sale.
Abu Dhabi National Oil Company, through debt unit Adnoc Murban, is offering investors three tranches maturing in five, 10 and 30 years, according to an arranging bank document seen by Reuters on Wednesday.
The national oil firm set up Adnoc Murban in January 2022 and tapped JPMorgan and Morgan Stanley to hold investor meetings that month. But plans were derailed after markets were plunged into turmoil following Russia’s invasion of Ukraine the following month and remained turbulent for much of 2022.
Since then, borrowing costs have soared after the US Federal Reserve hiked interest rates by 525 basis points between March 2022 and July 2023.
Adnoc has repeatedly weighed whether to issue bonds amid the higher rates environment and as it sat on a huge windfall from sky-high oil prices in 2022, bankers have said.
Reuters reported last year that Adnoc was considering reviving its plans for a debut bond sale but a deal did not materialise.
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Initial guidance for the five-year notes was around 105 basis points over US Treasuries, the document showed. Guidance for the 10-year and 30-year bonds was around 115 bps and 145 bps over US Treasuries, respectively, the document showed.
“For clarity, we do not intend to access the market in the same way how our regional peers have done with mega, jumbo inaugural debt offerings,” chief investment officer Klaus Froehlich said in an investor presentation seen by Reuters.
Saudi Aramco hauled US$12 billion in its 2019 debut bond sale and Qatar Petroleum – now QatarEnergy – grabbed US$12.5 billion in its 2021 inaugural issuance.
“More likely, we will be accessing the market in sizes of US$3 billion to US$5 billion per annum, unless we decide to tap into alternative markets such as sukuk. But overall, you can expect that the total programme size, which is at US$15 billion, we’ll do that in a couple of years.”
Adnoc had previously issued a project bond, and investors in its pipeline assets also issued bonds, but the oil giant did not have “that active capital markets coverage,” Froehlich said. “We’ve changed that now.”
The structure of Adnoc Murban, named after the company’s flagship crude grade, gives it momentary ownership of Murban barrels, which it then sells to Adnoc and its subsidiary Adnoc Trading. Bond investors get paid before Adnoc Group royalties, most operating expenditures and tax.
Adnoc Murban is rated AA by Fitch and S&P and Aa2 by Moody’s.
JPMorgan and Morgan Stanley are global coordinators for the debt sale.
BofA Securities, Citi and First Abu Dhabi Bank are active bookrunners while Abu Dhabi Commercial Bank, HSBC, Mizuho and SMBC Nikko are passive bookrunners. REUTERS
