ADNOC ‘considering offer of exchangeable bonds’

ADNOC headquarters, left, in Abu Dhabi. ADNOC is seeking a minimum free float of 15 percent to attract international investors, sources say. (Reuters)
Short Url
Updated 07 February 2020

ADNOC ‘considering offer of exchangeable bonds’

  • Move gives investors option to exchange bond for the stock of company

DUBAI: Abu Dhabi National Oil Company (ADNOC) is considering offering exchangeable bonds that could be converted into shares of ADNOC Distribution, as one option for increasing the free float of the listed unit.

ADNOC is working with several advisers on the transaction, four sources familiar with the matter, who declined to be named as the matter is not public, told Reuters.

ADNOC declined to comment on Thursday.

An exchangeable bond gives investors the option to exchange the bond for the stock of a company other than the issuer at some future date and under prescribed conditions.

Two of the sources said that a deal could take place in the coming three to four months, while a third said that ADNOC plans to list the bonds on the Abu Dhabi Securities Exchange.

“They’re working on it. They want the process to be smooth with an immediate listing (of the bonds) following,” one of the sources said.

FASTFACT

10%

ADNOC listed 10 percent of ADNOC Distribution, the largest operator of petrol stations and convenience stores in the UAE, on the Abu Dhabi Securities Exchange in 2017.

ADNOC listed 10 percent of ADNOC Distribution, the largest operator of petrol stations and convenience stores in the UAE, on the Abu Dhabi Securities Exchange in 2017.

Reuters reported in June 2018 that ADNOC was considering selling another 10 percent stake in its fuel distribution business.

ADNOC Distribution was seeking a minimum free float of 15 percent to improve its chances of joining the MSCI Emerging Markets Index and attract more international investors, a source told Reuters at the time. Should an exchangeable bonds materialize, it would be the latest sign that the Gulf’s giant oil companies are increasingly turning to international capital markets to fund expansion.

Before oil prices crashed in 2014, state energy firms in the Gulf largely financed themselves with money from their governments. But low oil and gas prices put government finances under pressure.

Oil giant Saudi Aramco raised $25.6 billion by listing about a 1.7 percent stake on the Tadawul in December, and in January exercised its “greenshoe option” to sell an additional 450 million shares, raising the size of its IPO to a record $29.4 billion. 


Turkey on brink of recession as economy collapses

Updated 13 August 2020

Turkey on brink of recession as economy collapses

  • Consumer debt has increased by 25 percent to more than $100 billion in the past three months

JEDDAH: President Recep Tayyip Erdogan’s popularity is plunging in lockstep with Turkey’s collapsing economy and the country is on the verge of a potentially devastating recession, financial experts have told Arab News.
The value of the Turkish lira has fallen to 7.30 against the US dollar and the central bank has spent $65 billion to prop up the currency, according to the US investment bank Goldman Sachs.
Consumer debt has increased by 25 percent to more than $100 billion in the past three months as the government moved to help families during the coronavirus pandemic, but the result has been a surge in inflation to 12 percent.
With the falling lira and increased price of imported goods, the living standards of many Turks who earn in lira but have dollar debts have fallen sharply.
The economy is expected to shrink by about 4 percent this year. The official unemployment rate remains at 12.8 percent because layoffs are banned, although many experts say the real figures are far higher.
To complete the perfect storm, tourism revenues and exports have been decimated by the pandemic, and foreign capital has fled amid fears over economic trends and the independence of the central bank.
Wolfango Piccoli, of Teneo Intelligence in London, said logic dictated an increase in interest rates but “this is unlikely to happen.”
Piccoli said central bank officials would strive to avoid an outright rate hike at their monetary policy meeting on Aug. 20. “A mix of controlled devaluation and backdoor policies, such as limiting Turkish lira’s liquidity, remains their preferred approach,” he said.
There is speculation of snap elections, and Erdogan’s view is that higher interest rates cause inflation, despite considerable economic evidence to the contrary.