The Emirates Development Bank, a lending institution wholly owned by the federal government of the United Arab Emirates, plans to sell its second international bond ever, expected to take place as early as this month, according to sources familiar with the matter. The sources, who requested anonymity due to the confidential nature of the information, stated that the bank, which began operations in 2015 and provides financing to citizens and small to medium-sized enterprises, may raise $750 million or more from the debt markets.
The proceeds will be directed toward supporting businesses in sectors that are prioritized in the country's economy. The bank's debt has been rated with the fourth-highest investment grade by Fitch Ratings, similar to the country’s sovereign debt. A spokesperson for Emirates Development Bank declined to comment.
The United Arab Emirates enacted a law in October 2018 allowing the federal government to issue sovereign debt for the first time, providing the country's seven emirates with the opportunity to benefit from a higher credit rating and lower borrowing costs. The Emirates Development Bank was the first entity to benefit from the debt law, having sold its first bond in 2019, while the government has not yet issued its first federal bond.
On another note, the price of Brent crude, the global oil benchmark, has nearly doubled since October, exceeding $70 per barrel, as major economies vaccinated their populations against the virus and reopened businesses, which has been a boon for the UAE, the third-largest oil producer in OPEC.
At the same time, favorable financing conditions supported by extremely low borrowing costs enhance reliance on sovereign bonds from emerging markets and government companies to meet any funding needs that arise later this year. Bahrain, Saudi Aramco, and Qatar Petroleum are among the debt issuers in the Gulf region that have decided to return to the bond markets. Abu Dhabi sold dollar bonds worth $2 billion in late May, followed by the emirate’s sovereign wealth fund, known as Mubadala Investment.
