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Bloomberg
Abu Dhabi bonds jumped after the emirate announced plans to combine two of its biggest investment companies, stoking bets the emirate will provide more support for its government-related entities.
Abu Dhabi National Energy Co.’s debt maturing 2024 rose the most since December 2014 on Wednesday, the day the government said it will merge
International Petroleum Investment Co., also known as IPIC, with Mubadala Development Company PJSC. The yield on Aabar Investments PJSC’s euro-denominated bonds due 2020 dropped a record 197 basis points. Aabar is owned by IPIC.
“The merger has a very strong signaling effect to all GREs in Abu Dhabi, and indirectly to Dubai GREs as well,†said Sergey Dergachev, a senior money manager at Union Investment Privatfonds GmbH in Frankfurt, which has about $13 billion of assets under management. “It means support from the state will be maintained and will remain at strong levels for GREs, and this is positive for weaker GREs like Aabar and Taqa who depend a lot on sovereign support.â€
The combination will pool assets of about $135 billion. The announcement came less than 10 days after National Bank of Abu Dhabi PJSC and First Gulf Bank PJSC said they’re in talks to merge as the emirate reigns in on spending amid a slump in oil prices.
Abu Dhabi is home to about 6 percent of the world’s proven crude reserves, and it relies on income from oil to help fund public spending.
Dubai Bonds
Paul De Meyer, an analyst in Antwerp at Capfi Delen Asset Management, which manages $19 billion in assets and holds Aabar Investments and IPIC bonds, said the merger will have a positive effect on market
sentiment.