Abu Dhabi sovereign wealth fund Mubadala has resorted to debt and equity markets to generate cash for new acquisitions as it surges ahead with an investment drive at breakneck speed.
So far this year, the SWF has committed an estimated US$6.8 billion of capital in at least 32 deals in private markets. Global SWF forecasts that Mubadala will top the record year for acquisitions in 2020, which saw a US$10.6 billion of investments in 30 deals. The Covid-19 pandemic has boosted its interest in expanding its global tech and healthcare portfolio, with a focus on early-stage innovators – and it has overhauled and restructured its organization to elevate disruptive investment in its business model.
To accelerate its investment program, the fund is Mubadala is selling down in “legacy commodity sectors” and deploying capital into disruptive industries in technology and healthcare, group chief executive Khaldoon Al Mubarak said in April. This week has seen it raise yet more debt and continue its exits from long-standing chunky stakes that came with its three predecessor funds.
Mubadala is planning to sell US$1.8 billion of bonds, raising the amount of debt raised by the fund so far this year to US$3.6 billion. The latest bond offer, via subsidiary MC Brazil Downstream, consists of 10-year senior secured notes, which will help finance its acquisition of Refinaria Landulpho Alves (RLAM), Brazil’s second biggest refinery. The 333,000bpd RLAM in Mataripe was purchased for US$1.65 billion, although the price was challenged by Brazilian trade unions who claim it is worth US$3.2-3.8 billion.
Ratings agency Fitch has rated the bond at BB- based on the refinery’s competitive location and large processing capacity, but noted the “inherent cash flow volatility of the refining business, as well as the company’s exposure to diesel and gasoline price controls in Brazil.”
Mubadala previously stated that the bond programme was established in 2009 as “part of our commitment to optimise our capital structure through a flexible approach to funding”.
In May, Mubadala sold US$1.5 billion two-tranche bonds via Mamoura Diversified Global Holding, including US$500 million of 10-year paper and US$1 billion of 30-year Formosa bonds sold in Taiwan. In March, it launched two-tranche bonds worth EUR1.1 billion (US$1.32 billion) comprising EUR600 million of six-year paper and EUR500 million of 13-year bonds.
The Abu Dhabi fund also staged an IPO of its wholly owned satellite communications firm Al Yah Satellite Communications Company (Yahsat) on stock exchanges this week. It attracted strong demand, raising about US$731 million, according to Bloomberg. It represented the first major IPO on the Abu Dhabi bourse since Abu Dhabi National Oil Co Distribution was listed in 2017. Established up in 2007, Yahsat is one of the largest providers of satellite communications services in the world in terms of annual revenues.
Yahsat is among the three portfolio companies that Mubadala is seeking to take public this year, sources previously told Reuters. It is now driving towards IPOs in Emirates Global Aluminium and chip-producer GlobalFoundries. Mubadala’s exits in 2020 included chunky stakes in Energias de Portugal, Borealis, Aldar Properties, Unicredit and Torresal Energy – together valued at nearly US$11 billion.