Banking & Finance

ADQ’s first $2.5 billion bond issue four times oversubscribed

May 2, 2024

ADQ listed its bonds on the London Stock Exchange, which it called a 'significant step' in diversification

ADQ bonds in two tranches
Orders worth $11bn
Proceeds to fund investment

Sovereign wealth fund ADQ has issued its first bonds, selling $2.5 billion of debt on the London Stock Exchange, in what the company says marks a “significant step” in diversifying its funding sources.

Founded in 2018, ADQ – Abu Dhabi Developmental Holding Co – is one of three major Abu Dhabi sovereign funds and has AED721 billion ($196 billion) in assets, according to its 2023 financial statement, which was published this week.

The bonds were more than four times oversubscribed, receiving orders totalling $11 billion. A five-year, $1.25 billion tranche priced at a coupon of 5.5 percent, while a 10-year tranche, also worth $1.25 billion, will pay 5.6 percent interest.

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In a statement, ADQ cited “favourable market conditions and continued investor appetite for high-quality, investment-grade bonds by emerging market issuers”. The US benchmark interest rate, against which bonds are usually priced, is at a two-decade peak of around 5.3 percent, having surged from near-zero in February 2022.

ADQ will use the money raised through the bond sale as “growth capital” and to “facilitate further investments in strategic initiatives”, the statement said.

Abu Dhabi’s government transferred its stakes in 13 companies to ADQ in 2019. These include Abu Dhabi Power Corp, Abu Dhabi Ports Co, Etihad Rail, Abu Dhabi Health Services Co, National Health Insurance Company (Daman) and Abu Dhabi Airports Co.

ADQ’s portfolio now spans about 25 companies across sectors including utilities, transportation, healthcare, agriculture and real estate.

Sister sovereign funds Abu Dhabi Investment Authority (ADIA) and Mubadala have assets under management of about $968 billion and $276 billion respectively.

Tahnoon bin Zayed Al Nahyan, a brother of Abu Dhabi ruler and UAE president Mohammed bin Zayed Al Nahyan, chairs both ADQ and ADIA.

ADQ made a net profit of AED16.1 billion in 2023, up from AED11.4 billion a year earlier, despite its operating profit falling year on year. Its net profit rose as its other net income nearly quadrupled to AED12.3 billion – in part as a result of gains on the value of its equity holdings in other companies.

The conglomerate’s 2023 annual revenue rose 12 percent year on year to AED111.7 billion. Its most significant annual revenue increases came from its subsidiaries in aviation; water, electricity and wastewater treatment; and ports, marine and logistics services. Revenue from its oil, gas and power fell versus 2023.