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Euromoney’s borrower awards 2007 |
| Overall awards | |
| Best sovereign/supranational/agency borrower | Best bank borrower |
| Best insurance borrower | Best ABS |
| Best CDO borrower | Best covered bond issuer |
| Best corporate borrower | Best high-yield/leveraged finance borrower |
| Latin America regional awards | |
| Best sovereign borrower | Best corporate borrower |
| Best financial borrower | |
| Central & Eastern Europe regional awards | |
| Best sovereign borrower | Best corporate borrower |
| Best financial borrower | |
| Asia regional awards | |
| Best sovereign borrower | Best corporate borrower |
| Best financial borrower | |
| Middle East and northern Africa regional awards | |
| Best borrower | |
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“We are a bondholder’s dream – there is nowhere else in the world where you can get returns like we offer at the level of credit risk we have” |
The international bond markets in the Middle East have had relatively few corporate names as issuers. But in the past 12 months one name has stood out. Not only has Taqa (Abu Dhabi National Energy Company), which is 75% owned by the Abu Dhabi government, issued the largest bond that the Gulf Cooperation Council countries have ever seen, at $3.5 billion, the three-tranche bond also produced one of the longest tranches ever, with a 30-year maturity date. “There have been a lot of good deals in this region in the last year but Taqa stood out from their peers. They did the most demanding deal – instead of choosing the easy route they chose to push the boundaries of debt issuance in the region and deserve to be rewarded for this,” says Ziad Awad, executive director, Goldman Sachs MENA region, whose bank was awarded the mandate of sole arranger and bookrunner on the deal after beating 20 other banks in the pitches.
On October 23 2006, Taqa priced its debut 144A bond, aimed at American and European investors, with a three-tranche issue. The deal consisted of €750 million maturing in seven years, $1 billion maturing in 10 years and a $1.5 billion issue maturing in 30 years. All the tranches are paying fixed coupons and have bullet maturities.
The euro tranche was a pioneering, benchmark issue. Sabic and Dubai Holdings both subsequently completed €750 million, seven-year tranches. The euro tranche also supports Taqa’s ambition to expand its European asset base.
The bond that Taqa completed had more aims than just funding acquisitions – one was to encourage a greater spread of investors in the face of legislation that prevents non-UAE citizens from buying equity in the company. The 144A structure of the deal and the euro tranche did as hoped – now the company can boast that 49% of the entire bond went to American investors, with another 40% taken by European investors. More than 200 investors came into the well-diversified order book, with placements being spread between fund managers (50%), banks (40%) and insurance/pension funds (10%).
Not only does the bond deserve acknowledgement for its size and investor spread; the deal is also having an impact on the whole region: “We needed a yield curve for the sovereigns in the region and for ourselves and now, finally, our 30-year tranche has taken big steps towards producing one,” says Peter Barker-Homek, chief executive officer of Taqa. “Not only this, but the bonds have, month on month, continued to tighten according to spreads. We are particularly pleased about this.”
As liquidity continues to grow in the region so investors from around the world are hungry for more debt than the Middle East seems able to offer. This was clearly illustrated by the staggering $10 billion order book that the A+ rated bond achieved. “You need to look at the risk and rewards,” says Barker-Homek. “We are a bondholder’s dream – there is nowhere else in the world where you can get returns like we offer at the level of credit risk we have.” Many issuances in the US and Europe that have the same credit rating have spreads that are up to double what Taqa and other strong credits in the Middle East can offer. “I want to drive down our spreads over time so that they are comparable to US companies with the same credit rating,” adds Barker-Homek.
As Taqa marches towards becoming a blue-chip company, so it aims to hold up to $20 billion in assets within the next 12 months, a substantial increase from the present $14 billion. It aims for a staggering $40 billion to $60 billion by 2012. The proceeds from the bond are helping to reach these aims as the company funds international acquisitions that add to its 80% to 90% market share of the local UAE energy and water markets. So far $694 million has been spent on acquiring BP Netherlands, and a further $550 million has been spent on operations in the UK’s North Sea fields. Finally, to date, CMS Generation, part of CMS Energy, was brought for $900 million, which gave the company access to power in Morocco, Ghana, Saudi Arabia, UAE and India, and meant Taqa also acquired ABB, a partner in CMS Generation stakes in Morocco and India, for $490 million.
However, Barker-Homek makes it clear that the company’s improved liquidity will also help change its debt profile. “At the moment we are reducing the level of subordinated debt in the company,” he says. “But we will use subordinated debt when there is a fiscal regime that suits it. For example, some regions do not offer such good tax relief if debt is held at the holding company level.”
Barker-Homek makes it clear that no acquisition will be made that could affect the company’s credit rating. “We will not grow at the sacrifice of our credit,” he says. “We recognize the importance of the risk profile we bring to the market. Every time we look at an acquisition we talk with the rating agencies and get our auditors in to make sure it is a sound investment.” The policy of raising capital before any acquisition has been followed to date and Citi has already been engaged to start an EMTN programme for the energy company. At this stage it is thought that the programme will raise a further $9 billion over the next five years.
