Dubai - Arabstoday
Abu Dhabi National Energy Co\'s (Taqa) move to buy back $1.5 billion (Dh5.5 billion) in bonds from investors — at a juicy premium — will help the company manage its debt levels at a time of increasingly expensive bank loans, but lower-rated Gulf corporates may struggle to follow a similar strategy. A-rated Taqa, 75 per cent owned by the government of Abu Dhabi, launched a tender offer this week to buy back its bonds maturing in 2012, and enlisted banks to arrange a possible new bond issue under its global programme. \"Combining a tender offer for the 2012 bonds with a new bond issue allows Taqa to refinance an upcoming liability, extend its debt maturity profile, and take advantage of the low interest rate environment which currently exists,\" said Chavan Bhogaita, head of the markets strategy unit at National Bank of Abu Dhabi. \"This strategy means all these things can be achieved without affecting the company\'s overall level of indebtedness.\" Cheaper pricing Pricing of the new bonds is likely to be cheaper than the existing facility, with top-rated Gulf names attracting strong demand globally because of their risk-reward profile. Taqa\'s 5.62 per cent October 2012 bond was bid at 103.500 on Wednesday afternoon, having rallied after the buyback launch, which offers a cash price of 103.75 to existing bondholders. The yield on the five-year bond has dropped about 110 basis points since the beginning of the year, according to Thomson Reuters data. \"A new issue of five-year duration will definitely go at under 4.75 per cent given swap curve and Taqa spreads,\" said one regional fixed income trader, declining to be identified. With global markets unstable and no clear resolution to the Eurozone debt crisis in sight, companies in the Gulf, facing refinancing humps in the next few years, are being forced to consider options to keep liabilities under control and funding costs down.