DUBAI, Oct 4 (Reuters) - The United Arab Emirates federal
government is expected to raise between $3 billion and $3.5
billion from its debut bond sale, which will comprise three
tranches denominated in U.S. dollars, two sources close to the
deal said on Monday.
While the federal government has never issued bonds before,
several of the seven emirates that it comprises have, most
notably the capital Abu Dhabi and commerce hub Dubai.
Sources told Reuters on Sunday the UAE would start marketing
its inaugural bonds this week.
On Monday, documents from banks leading the deal reviewed by
Reuters showed the finance ministry was planning a debut sale of
senior unsecured bonds with maturities of 10, 20 and 40 years,
subject to market conditions.
The 40-year portion will be Formosa bonds, which are debt
securities sold in Taiwan by foreign borrowers and denominated
in currencies other than the Taiwanese dollar.
The proceeds will be used for "domestic budgetary purposes
in compliance with the Public Debt Strategy", an offering
circular seen by Reuters showed.
These include financing cabinet-approved infrastructure
projects up to a maximum of 15% of the UAE's direct and indirect
outstanding public debt that is not denominated in dirhams.
The funds will also be used to back investments by the
Emirates Investment Authority, the UAE's only federal sovereign
The finance ministry hired a group of banks to lead the deal
comprising Abu Dhabi Commercial Bank, BofA Securities
, Citi, Emirates NBD Capital, First Abu
Dhabi Bank, HSBC, JPMorgan,
Mashreqbank and Standard Chartered.
They will hold investor calls starting on Monday.
The federal budget accounts for only a fraction of
consolidated state spending in the UAE and is partly funded by
grants from Abu Dhabi and Dubai, which have their own budgets.
Oil-rich Abu Dhabi contributed 9.3 billion dirhams ($2.53
billion) and Dubai provided 1.2 billion dirhams to 2020's 50
billion dirhams revenues, expected to rise to 53 billion dirhams
this year, an investor presentation reviewed by Reuters showed.
Dino Kronfol, Franklin Templeton's chief investment officer
of global sukuk and MENA fixed income, said the UAE federal
government was not very different from Abu Dhabi as a credit.
"But it's an important leap in terms of sovereign engagement
in capital markets. It's ultimately more efficient to deal with
a sovereign UAE than seven emirates," he said.
The federal government has no debt, while the aggregate debt
of the individual emirates is under 30% of the country's GDP,
the circular said.
($1 = 3.6726 UAE dirham)
(Reporting by Yousef Saba; Editing by Toby Chopra, William