The Daily Update - Mubadala Taking Over the World

Mubadala Investment Co, Abu Dhabi’s sovereign wealth fund and one of our core holdings has been extremely busy over the last eighteen months; according to records it has transacted 31 major deals since January 2017.

Mubadala was created back in 2002 but has sprung into life following its merger with Abu Dhabi’s Investment Council which doubled its balance sheet to around $250bln and has become the main focus of the government to diversify the country’s economy from oil production. Mubadala’s previous role was operational investing in the oil sector but under its new mandate it has become a global investment fund competing with Qatar’s QIA fund and Saudi Arabia’s Public Investment Fund.

The fund is thought to be opening an office in Moscow and is thought to have already transacted around 40 deals with Russia’s sovereign wealth fund. Just this year the company led a consortium to sell to Sony, EMI Music Publishing for $2bln, hired Bank of America and Morgan Stanley for a reported $3.8bln IPO of Spain’s Cepsa Trading and said to be arranging a bid of around $8bln in a partnership with EIG Global Energy Partners the private equity firm for Brazil's Petroleo Brasileiro’s natural gas pipeline network.

Mubadala has a number of bonds trading in the market mainly in US dollars such as the 3.75% maturing April 2029 which is a $650mil issue issued April 2017 from their Euro-MTN programme and is highly rated by all the agencies as a mid AA or Aa2 from Moody’s. Currently this bond trades at a yield of around 4.13% which is US Treasuries (UST) plus 115bp for its 8.6 year duration. According to our ‘Relative Value Model’ (RVM) fair value is around UST +55bp and so the issue is trading just under 4 credit notches cheap and has an expected return including yield of 9%: extremely good value for such a wealthy and highly rated credit.

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