Moody’s assigns Aa2 rating to Abu Dhabi’s $10 bln triple-tranche bond

Abu Dhabi's rating is supported by strong institutional framework and effectiveness, according to Moody's. (File photo: AP)

Moody’s Investors Service assigned Abu Dhabi’s $10 billion three-tranche bond a ‘Aa2’ senior unsecured rating, citing the emirate’s “Very High (-)” economic strength.

The rating is at the same level as the long-term issuer rating of the Abu Dhabi government, which is supported by a robust economic outlook, very large hydrocarbon reserves, and “superior” infrastructure, Moody’s said in a statement on Tuesday.

“The rating also reflects the ‘High (+)’ institutional strength, taking into account the emirate’s strong institutional framework and effectiveness, which is counterbalanced by high inflation volatility and significant transparency issues,” Moody’s added.

The ratings agency mentioned that prospects of economic diversification from hydrocarbons and a decline in the government’s dependence on oil revenues could potentially prompt an upgrade of Abu Dhabi’s current rating.

In another scenario, Abu Dhabi’s rating could be downgraded if economic reforms are not implemented by the government to maintain its fiscal strength and a prolonged period of low oil prices (below Moody’s current price assumptions) squeeze the emirate’s revenues.

“Social risks currently exert limited impact on Abu Dhabi's credit profile, although the effectiveness of labor market nationalization policies in keeping unemployment low among citizens will remain an important consideration for the foreseeable future,” Moody’s added.

The latest rating for the three tranche bond was initiated by Moody's Investors Service and was not requested by the rated entity, Moody’s said.

Abu Dhabi enjoys a rating of Aa2 by Moody’s, AA by S&P, and AA by Fitch, with outlooks stable by all three rating agencies.

Last Update: Wednesday, 20 May 2020 KSA 09:54 - GMT 06:54