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Financials

UPDATE 3-Abu Dhabi sells $7 billion in bonds after Qatar's jumbo issue

(Recasts, adds size, final spreads)

DUBAI, April 8 (Reuters) - Abu Dhabi sold $7 billion in bonds on Wednesday, sources said, following Qatar’s $10 billion debt sale on Tuesday, as Gulf states seek extra liquidity amid low oil prices and the coronavirus outbreak.

Considered the best credit in the region, oil-rich Abu Dhabi - the capital of the United Arab Emirates - received around $44 billion in orders for the debt sale, the sources said.

But a plunge in oil prices which has raised borrowing costs of Gulf oil exporters meant it had to offer investors a premium.

A spokesman at Abu Dhabi’s department of finance did not respond to requests for comment.

Like Qatar, Abu Dhabi sold debt in three tranches of five, 10 and 30 years.

It offered an interest rate equivalent to 220 basis points (bps) over US Treasuries for $2 billion in five-year bonds, 240 bps over the same benchmark for $2 billion 10-year bonds and 4.1% for $3 billion 30-year notes, sources said.

That corresponded to about 30 bps more than the emirate’s existing bonds due in 2024, 2029, and 2049, Refinitiv data showed.

“Whilst the spreads paid on the Abu Dhabi deal may seem outrageous relative to six weeks ago, the issuance is important to set a benchmark for the quasi-sovereign, financial institutions and high grade corporate issues to reference,” said Doug Bitcon, head of credit strategies at Rasmala Investment Bank.

STRONG INTEREST

Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital, said the deal “seems to have generated strong interest with a $44 billion order book ... And while pricing is still wider than pre-crises levels they were able to tighten it substantially from launch levels.”

Earlier on Wednesday, the emirate - rated AA by S&P and Fitch - had started marketing the paper with spreads 45 basis points higher than what was finally offered.

Investors sold Gulf debt last month in consideration of the strain lower oil revenues would put on the budgets of regional governments following the collapse of an output cuts deal among international producers which sent oil prices tumbling.

Abu Dhabi hired BofA Securities, Citi, First Abu Dhabi Bank, HSBC, JPMorgan, and Standard Chartered to arrange the debt sale.

Qatar got around $45 billion in orders for its $10 billion bonds on Tuesday but ended up offering some 40 bps over its existing curve.

“This week, the market has been solid and you don’t know when this market shuts down again. So I think everyone just wants to take the money that is available on the plate,” a debt banker said.

Most governments in the Gulf region are exploring debt-funding options.

As of April 8, the UAE had registered a total of 2,659 cases of coronavirus. The pandemic has brought vital sectors of its economy, such as tourism and transportation, to a near standstill. (Editing by Larry King and Ken Ferris)

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