Abu Dhabi has registered to borrow as much as $10 billion from international investors. The bonds would raise Abu Dhabi's debt tenfold to 10 percent of forecast gross domestic product, according to Fitch Ratings, which assigned a ranking of AA, the third-highest investment-grade category. The emirate would remain “one of the strongest net external creditors,” Fitch said. Standard & Poor's and Moody's Investors Service issued equivalent ratings. Abu Dhabi is the wealthiest member of the United Arab Emirates, which provided a $10 billion bailout last month for Dubai as the emirate struggled to meet payments on $80 billion of debt used to finance real estate projects including the world's tallest building. Dubai has said it plans to borrow a further $10 billion without specifying details. “Abu Dhabi needs a lot of money to bail out Dubai,” said Paul McNamara, who helps manage $1.2 billion of emerging-market debt at Augustus Asset Managers Ltd. in London. “Abu Dhabi has an awful lot of money and I think they would prefer to ring- fence it - do the borrowing without necessarily drawing down on the sovereign wealth fund.” The UAE economy may contract this year because of the global financial crisis, Minister of Economy Sultan Bin Saeed Al-Mansouri said on March 19. Fitch estimates government revenues in Abu Dhabi will shrink to less than half of 2008 levels after crude fell 64 percent from a record $147.27 a barrel in July. The MSCI GCC Index of equities in the Gulf region declined 57 percent in the past 12 months, compared with a 43 percent drop in the MSCI World Index. Dubai last month sold half the bonds from a $20 billion medium-term note program to the UAE's central bank to assist state-owned companies struggling to raise money amid a slump in the emirate's property, tourism and financial service industries. “Abu Dhabi is thinking that given what has happened globally in the past year, it makes sense to be properly diversified,” said Raphael Kassin, a money manager at Zurich-based Credit Suisse Group AG who helps oversee about $1 billion in emerging-market debt. “This is more of a precautionary move to be more diversified and as a result more protected. No doubt Abu Dhabi is among the top three countries in the world in terms of creditworthiness.” The Abu Dhabi Investment Authority, with $750 billion in assets, is the world's largest sovereign wealth fund, according to a report e-mailed on Thursday by London-based research firm Preqin. It estimates that the government-owned funds had $3.22 trillion in investments at the end of 2008. The emirate first sold international bonds in 2007. The bonds due 2012 fell 1.2 percent yesterday, the biggest decline in a month, to 103.28 cents on the dollar, increasing the yield to 4.3 percent, according to prices on Bloomberg. Abu Dhabi is likely to pay about 300 basis points, or 3 percentage points, more than US Treasuries to sell long-term debt, Augustus Asset's McNamara said.
