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.
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.