UAE debt issuers see smaller books, modest price compression amid geopolitical risk overhang

By Brinda Darasha

Investor appetite remained resilient but cautious as two leading UAE banks and the Dubai government-backed logistics giant DP World raised funds in international debt markets last week against a backdrop of renewed geopolitical tensions in the Middle East.

First Abu Dhabi Bank (FAB), the UAE's largest lender by assets and market capitalisation, set the ball rolling with a $500 million five-year senior unsecured bond. As orders ballooned to more than $1 billion, the bank tightened pricing to 90 basis points over US Treasuries, from initial price thoughts in the T+115bp area. Analysts at CreditSights estimated fair value at T+85bp.

Mashreq, the UAE's fifth-largest and oldest local commercial bank, also raised $500 million through a five-year bond carrying a fixed coupon of 5.625%, payable semi-annually. The bond was priced to yield 5.736%, with a reoffer price of 99.523%.

The Mashreq deal attracted orders of more than $1.1 billion at launch, excluding joint lead managers (JLM) interest, allowing pricing to tighten by 30bp from guidance in the +145bp area to a final spread of 115bp over UST. However, the order book later eased to $925 million, including $50 million of JLM interest. CreditSights penciled in fair value at +110bp.

The smaller than 2X demand compares less favourably with Mashreq's $500 million sukuk issued in April 2025, when orders reached $3 billion, allowing the bank to tighten pricing by 35bp from IPTs in the 140bp area. Final books remained strong at $2.65 billion, supported by robust Islamic investor demand and the relative scarcity of Mashreq paper.

Nearly 18 months later, however, the lender's conventional bond drew demand of less than 2X in demand.

FAB’s five-year issue also attracted a smaller level of demand, with the order book at about twice the deal size. Roll back nine months and the lender opened the year with a $750 million five-year senior Eurobond carrying a 4.299% coupon. Pricing tightened to 60bp over UST from IPTs of 95bp over, while the final order book, excluding JLM, reached $2.8 billion, representing nearly four times subscription coverage.

"That is the result of the regional tension. Books have gone from six times covered to less than two times. I think the biggest concern for both deals was whether the issuers would try to raise $750 million. Fortunately, the banks and syndicate teams involved were mindful of what is happening in the region and decided to keep the deal size at $500 million rather than overstretching," a regional banker not involved in the transactions told Zawya.

In terms of price compression, FAB saw tightening go from 35bp to 25bp between January and September 2026. Mashreq managed to shave only off 30bp in the latest round compared with 35bp earlier.

DP World’s dual tranche

DP World, which has been significantly impacted by the closure of the Strait of Hormuz, priced a dual-tranche transaction comprising euro-denominated green notes and US dollar conventional bonds.

The company issued €750 million of six-year green notes at a 4.750% coupon, equivalent to 150bp over mid-swaps, and $750 million of 10-year conventional notes at a 6.250% coupon, also priced at 150bp over UST.

Both tranches tightened from IPTs of around 175bp over their respective benchmarks. Excluding joint lead manager interest, books exceeded $1.5 billion for the green tranche and $1.4 billion for the 10-year dollar tranche.

By comparison, DP World's $1.5 billion green bond issued in 2023 attracted $3.4 billion of orders, making it 2.3 times oversubscribed. In 2025, the company raised $1.5 billion through a 10-year sukuk, with investor demand approaching $4 billion.

"The pattern emerging is clear. Earlier issuances were attracting five to six times coverage, whereas current deals are generating significantly lower oversubscription levels," the banker noted.

(Writing by Brinda Darasha; editing by Seban Scaria)

(brinda.darasha@lseg.com)