Earlier this week, MDGH-GMTV B.V. came to market with a USD4bn multi-tranche issue. The final issue rating is expected to be AA rated by both S&P and Fitch. MDGH-GMTV B.V. is a full subsidiary of Mamoura Diversified Global Holdings PJSC (MDGH), formerly known as Mubadala Development Company PJSC (MDC), and the bonds are unconditionally and irrevocably guaranteed by Mamoura. The issue consisted of 6-year, 10-year and 30-year bonds issued at coupons of 2.5%, 2.875% and 3.95% and saw strong investor demand which was reported in excess of USD23.5bn. Final spreads (over mid-swaps) were tightened ~40bps and the 30-year coupon tightened (from 4.375% to 3.95%) from initial guidance.
Bonds issued by MDGH-GMTV B.V. continue to be core holdings across our portfolios and we continue to view quasi-sovereigns from wealthy/creditor nations as an attractive place to be positioned on a risk-reward basis. Most quasi-sovereigns trade at wider spreads than their own governments giving extra compensation for what are often modest additional risks; although these issues are often not explicitly guaranteed by the government, the strategic importance of the assets means that the government is likely to stand behind these assets and the issuer.
To illustrate the point MDGH-GMTV 3.75% 2029 trades at a spread of 215bps over USTs yielding 2.74% and ~4.2 credit notches cheap on our models versus the Abu Dhabi Government 2.5% 2029 which trades at a spread of 165bps over USTs yielding 2.25% and ~2.9 notches cheap. Both bonds are rated AA/AA by S&P/Fitch respectively.
MDGH, while it does not have an explicit government guarantee, plays a critical role for the government given its mandate to diversify the economy, and as a key vehicle for business development and the integration of Abu Dhabi into the world economy. MDGH is indirectly 100% owned by the government via the Mubadala Investment Company (MIC). The strategic importance of the company cannot be overstated with previous comments from government officials saying of the former Mubadala Development Company that “it is impossible to differentiate between the government and any of these entities in terms of credit risk because the government supports these entities fully and unconditionally”.