Deals of year logo 2021

A look at the year's most noteworthy deals in the Middle East.

Corporate bonds

Winner: Sabic’s $1bn dual-tranche issuance

Bookrunners: BNP Paribas, Citi, HSBC, Mizuho, MUFG and SMBC

There has been a difficult market backdrop over the past 12 months for the petrochemicals industry as demand for oil has slumped, as well as the broader economic effects of Covid-19, intensifying funding needs.

Against this context, Saudi Basic Industries Corporation (Sabic), the world’s fourth largest petrochemicals firm, raised $1bn in a dual-tranche issuance in September 2020, taking advantage of a resurgence in market activity following the end of the northern hemisphere summer.

The company, 70% owned by Saudi Aramco, following its investment in the company in June 2020, and with a further 30% floated on the Tadawul stock exchange, issued $500m of 10-year bonds and $500m of 30-year Formosa bonds. Formosa bonds are sold in Taiwan by foreign issuers and denominated in non-Taiwanese currency.

There was considerable demand for the bonds, with the total orderbook eight times oversubscribed. Final pricing for the 10-year bonds was completed at 155 basis points over midswaps (2.150%) and 3% for the 30-year notes, with the strong demand allowing for substantive tightening of the pricing for the 10-year notes.

The offering established Sabic’s curve in the long end, with its first ever 30-year tranche. The transaction enjoyed strong interest from the international investor community, attracting sizeable triple-digit orders from high quality institutional accounts from Europe and Asia.

Sovereign, supranational and agencies financing

Winner: Mubadala’s $4bn triple-tranche issuance

Bookrunners: Bank of America, Banca IMI, BNP Paribas, First Abu Dhabi Bank, HSBC, Natixis and Société Générale

Mubadala Investment Company, one of the UAE’s largest sovereign wealth funds, was created in 2017 in a merger between the International Petroleum Investment Company (IPIC) and Mubadala Development Company in 2017. It aims to invest in opportunities, globally, promoting growth and innovation, ultimately supporting the UAE’s economic development.

The state-owned entity has a number of aims via its funding strategy: to diversify its funding sources and issue funding at a low cost, while also extending and smoothing out its debt maturity profile.

In May, Mamoura Diversified Global Holding, Mubadala’s debt issuing entity, priced a $4bn, triple-tranche bond offering. It was comprised of a $1.0bn six-year tranche, a $1.0bn 10-year tranche and a $2.0bn 30-year Formosa tranche. Formosa bonds are sold in Taiwan by foreign issuers and denominated in non-Taiwanese currency.

There was strong demand for the bonds, driven by institutional investor interest from across Asia, the Middle East and Europe, with order books peaking in excess of $24bn. Final terms were set at midswaps plus 210 basis points (bps) for the $1.0bn six-year, midswaps plus 235bps for the $1.0bn 10-year, and 3.95% for the $2.0bn 30-year Formosa. This represented substantive price tightening from initial guidance.

The offering played an important role in reopening capital markets activity for the region, with it the first government-related entity or corporate bond offering post the Covid-19 pandemic.

Equities

Winner: BinDawood Holding’s $585m IPO

Special Adviser: Moelis

Joint financial advisers: Goldman Sachs, JPMorgan

Bookrunners: GIB Capital, NCB Capital

The global groceries market is one sector that remained in good health throughout the Covid-19 pandemic. With many populations confined to their homes at various points throughout the last 12 months, demand for groceries has been high.

Saudi grocery chain BinDawood is one such retailer that has benefitted from increased demand, with its profits increasing by 32% and revenue increasing by 11.6% in the first nine months of 2020. It also proved an opportune time for the company to publicly list its shares for the first time.

In October 2020, the company listed 20% of its shares on Saudi Arabia’s Tadawul stock exchange. Shares were priced at SR96 ($25), the top of price guidance, with a total offering of SR2.2bn. At the time of listing the company had a market capitalisation of SR11bn. The listing was the region’s largest since the outbreak of Covid-19.

The offering was a significant success, with the institutional tranche of shares more than 48 times oversubscribed, including substantial interest from UK and US investors. Buyers included private funds, public funds and government institutions. Its share price jumped 10% when trading began on October 21.

The company has 73 stores across its two brands – BinDawood and Danube – and plans to open an average of six stores a year to reach 100 outlets by 2024.

Financial institutions group financing

Winner: NBK’s $700m perpetual securities

Bookrunners: Citi, HSBC, JPMorgan, NBK Capital, Standard Chartered, UBS

National Bank of Kuwait (NBK), the country’s largest bank, returned to the bond markets in February 2021 with a refinancing deal, as the end of the non-call period for $700m of outstanding perpetual non-call six-year (NC6) Additional Tier 1 (AT1) bonds, which it issued in April 2015, fast approached.

It opted to issue a new tranche of securities with the same perpetual NC6 structure, as the previous notes and executed the call option on the prior tranche on April 9, 2021.

The new tranche of bonds was priced with a coupon of 3.625%, reflecting a price tightening of 37.5 basis points from initial guidance. The issuance received healthy demand, and was multiple times oversubscribed with orders from 169 investors.

It was the lowest coupon ever achieved for a conventional US dollar denominated AT1 issuance from a bank in the Middle East and north Africa region.

Infrastructure and project finance

Winner: Adnoc’s 49% stake sale in gas pipelines

Financial advisers to Adnoc: Bank of America, First Abu Dhabi Bank, Mizuho, Rothschild & Co

Independent financial adviser: Moelis & Co

Senior mandated lead arrangers: Abu Dhabi Commercial Bank, Banco Santander, BNP Paribas, First Abu Dhabi Bank, HSBC, Mizuho, MUFG, Standard Chartered Bank, SMBC

Mandated lead arrangers: Citi, Crédit Agricole, Natixis, Société Générale, Emirates NBD, Samba

Arrangers: CaixaBank, DBS Bank

In one of 2020’s largest global energy infrastructure transactions, a consortium of the world’s leading infrastructure investors and operators, sovereign wealth and pension funds have acquired a 49% stake in Adnoc Gas Pipelines, a newly created subsidiary of state-owned energy firm Abu Dhabi National Oil Company (Adnoc).

The consortium – consisting of Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities, and Italian energy infrastructure company Snam – invested a total of $10.1bn, valuing the company at $20.7bn. A $7.96bn two-year commercial loan was signed by the consortium to back their investment. Adnoc will retain the 51% majority stake.

Adnoc Gas Pipelines holds a 20-year concession to 38 gas pipelines covering a total of 982 kilometres. The pipelines are a key component of the UAE’s energy ecosystem, transporting sales of gas from Adnoc’s onshore plants to its delivery network and domestic end-customers.

The transaction structure allows Adnoc to tap new pools of low cost international investment capital, while maintaining full operating control over the assets included within the consortium’s investment. The transaction will result in upfront proceeds of more than $10bn to Adnoc. In return, Adnoc will pay Adnoc Gas Pipelines a volume-based tariff for use of the pipelines, backed by minimum volume commitments – offering a low-risk profile and stable cash flows to the consortium’s investors.

Islamic finance and sustainable finance

Winner in both categories: IsDB’s $1.5bn sustainable Covid-19 sukuk

Joint lead managers and joint bookrunners: Citi, Crédit Agricole, Emirates NBD, GIB Capital, HSBC, Islamic Corporation for the Development of the Private Sector, Natixis, Société Générale and Standard Chartered.

Co-manager: Kuwait International Bank

The Islamic Development Bank (IsDB) has adopted a wide-ranging approach to funding programmes to tackle to consequences of the Covid-19 pandemic. Its five-year $1.5bn sustainable Covid-19 sukuk in June 2020 was a key transaction as part of its efforts around three pillars of “Respond, Restore and Restart”.

IsDB was the first body to issue an Islamic instrument to finance efforts to combat the effects of Covid-19. The sukuk, the second issuance under the bank’s sustainable bond framework, was rated AAA – the first ever AAA-rated Sustainability Sukuk in the global capital markets.

The proceeds from the sukuk will be directed towards “access to essential services” and “small and medium-sized enterprise financing and employment generation” programmes across its 57 member countries.

Bookbuilding for the sukuk began on June 17, with initial price thoughts set at the midswaps plus 70 basis points (bps) area. Following strong demand from investors, the deal was eventually priced at midswaps plus 55bps, tightening by 15bps. This is the lowest profit rate ever that the bank has achieved for a US dollar-denominated public sukuk.

The distribution of investors was well diversified, with 53% allocated to Middle East and north Africa, 37% to Asia, 8% to Europe, and 2% to others including US offshore.

Loans

Winner: QNB’s $3.5bn term loan

Bookrunners, mandated lead arrangers and underwriters: Bank of America, Barclays, HSBC, Maybank, Mizuho, MUFG, SMBC, Standard Chartered and UOB

Mandated lead arrangers: Intesa Sanpaolo and JPMorgan

Qatar National Bank (QNB) is the largest bank in the Middle East region. In October 2020, it opened syndication on refinancing of a $3.5bn term loan facility, which had first been written in 2018.The loan included a $2bn three-year tranche and a $1.5bn five-year tranche and will be used for general corporate purposes.

The syndication closed in mid-November. In addition to the nine underwriters, a total of 25 institutions from around the world committed to the financing, underscoring the success of the transaction despite challenging market dynamics at the time. There was significant international investor interest in the loan, allowing QNB to broaden its investor base.

Notably, it was the first widely syndicated five-year term facility for a bank financial institution since the financial crisis and the largest five-year dual-tranche syndication ever issued by a bank in the Middle East.

M&A

Winner: ADPower and Taqa’s merger

Advisers to ADPower: Citi, Rothschild & Co

In July 2020, Abu Dhabi National Energy Company (Taqa) and Abu Dhabi Power Corporation (ADPower) completed a merger which created one of the largest power companies in the Middle East, with total assets worth around Dh200bn ($54bn) and around Dh42bn in revenue.

As part of the deal, ADPower transferred the majority of its power and water generation, transmission and distribution assets to Taqa in exchange for more than 106.3 billion new shares.

This landmark transaction will accelerate the transformation of the power and water industry in the UAE, and is widely regarded as a positive development. For instance, following the deal, Moody’s upgraded Taqa’s issuer rating to Aa3 from A3, with the agency commenting that the new assets had had a significant positive impact on Taqa’s business and financial profiles.

Prior to the transaction, ADPower was a 74.1% shareholder of Taqa; following the merger that has increased to 98.6%. Taqa remains listed on the Abu Dhabi Securities Exchange and it intends to increase the size of its free float through a public offering in the future.

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