Abu Dhabi National Oil Company Announces Cash Settlement for Exchangeable Bonds in ADNOC Distribution

Abu Dhabi National Oil Company (ADNOC) confirmed plans to redeem its exchangeable bonds in subsidiary ADNOC Distribution via a cash payment upon maturity in June 2024. This move fulfills ADNOC's financial obligations associated with the bonds, issued in May 2021 alongside an offering of shares in ADNOC Distribution.

The US dollar-denominated senior unsecured bonds carry a coupon rate of 0.7%. ADNOC intends to settle the full principal amount, reaching up to $1.195 billion, alongside accrued interest of up to $4.18 million.

Holders of the exchangeable bonds had the option to convert them into ADNOC Distribution shares until May 4, 2024. However, ADNOC has elected to settle the bonds entirely in cash and retain ownership of the underlying shares, representing approximately 7% of ADNOC Distribution's registered share capital.

This decision ensures ADNOC Distribution's free float, the portion of shares available for public trading, remains at 23% following the bond redemption. This maintains the company's current public ownership structure.

The move reflects ADNOC's commitment to fulfilling its financial obligations while strategically managing its holdings within ADNOC Distribution. The company has previously stated its intention to maintain a stable shareholding level in the subsidiary.

ADNOC's decision to redeem the bonds in cash is likely influenced by several factors. The relatively low coupon rate of the bonds suggests that ADNOC may view alternative uses for the capital as more financially advantageous. Additionally, retaining ownership of the underlying shares allows ADNOC to potentially benefit from future appreciation in ADNOC Distribution's stock price.

The cash settlement offers certainty to bondholders, who will receive the full principal amount upon maturity. This predictability can be valuable for investors managing their portfolios.

The upcoming redemption is expected to have a limited impact on ADNOC Distribution's overall operations. The company maintains a strong financial position and continues to focus on its core business activities.

Previous Article Next Article