February 27, 2020 / 4:22 PM / a month ago

Abu Dhabi in talks with banks for debut loan of $2 billion - sources

DUBAI, Feb 27 (Reuters) - The government of Abu Dhabi is in talks with banks for a $2 billion loan, two sources familiar with the discussions said, a move which would allow the oil-rich emirate to tap new liquidity pools in an era of low oil prices.

Abu Dhabi, the capital of the United Arab Emirates, sold its latest international bonds in September last year, raising $10 billion for budgetary purposes and garnering almost $20 billion in demand.

It is now working on a “self-arranged loan”, putting together commitments from banks for a potential $2 billion debt facility which, if finalised, would be the government’s first, the two sources familiar with the discussions said.

The Abu Dhabi Department of Finance declined to comment, a spokesman said.

Rated AA by S&P and Fitch and Aa2 by Moody’s, Abu Dhabi has one of the world’s largest sovereign net foreign asset positions and low levels of debt, but its fiscal balance depends almost entirely on revenue from hydrocarbon royalties and taxes and dividends received from ADNOC, its national oil company.

Sources told Reuters earlier this month that the emirate had been in discussions with banks for potential issues in the debt markets this year as part of plans to engage global fixed income investors on a more regular basis.

Discussions with potential bond advisers were put on hold about two weeks ago, said one of the two sources and a third source familiar with the matter.

A fourth source said it would make sense for the emirate to tap different pools of liquidity after its latest $10 billion jumbo bond.

Governments in the Gulf region have resorted to large amounts of debt finance over the past few years to offset the impact of lower oil prices on their revenues.

After oil prices dropped in 2014 and 2015, Abu Dhabi reduced public spending and increased dividends from state-owned entities.

It had forecast a deficit of 27.2 billion dirhams ($7.41 billion)for 2019, according to its latest bond prospectus.

$1 = 3.6728 UAE dirham Reporting by Davide Barbuscia; Editing by Kirsten Donovan

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