Abu Dhabi – EcoPulse24
Aldar Properties, one of the UAE's leading real estate developers, has raised $1 billion through a hybrid bond issuance that attracted significant interest from global investors, with demand exceeding $4.2 billion - more than four times the offered amount.

This strategic move is part of the company's effort to strengthen its capital structure and support expansion plans. Proceeds from the issuance will be used to expand Aldar's land bank, grow its "develop-and-hold" asset portfolio, pursue strategic acquisitions, and optimize its debt structure. Notably, this marks Aldar's second hybrid bond issuance within a year, bringing total capital raised in 2025 to $5.1 billion, including $1.5 billion from hybrid instruments.

Strong Global Demand and Geographic Diversification

The geographic distribution of investors demonstrated substantial international interest in the UAE economy and its real estate sector. The Middle East and North Africa region accounted for 31% of total demand, followed by the United Kingdom at 27%, North America at 24%, Asia at 10%, and Europe at 8%. Aldar's stock closed at AED 9.02 on Friday trading with a modest decline of 0.55%, maintaining a market capitalization of AED 70.9 billion, in routine trading that reflected market stability following the deal announcement. This geographic diversity in the investor base reflects major financial institutions' appetite for exposure to Gulf growth markets, particularly amid the accelerated expansion of the real estate sector in Abu Dhabi and Dubai.

The unsecured and subordinated bonds carry a 30.25-year maturity, an initial yield of 5.95%, and a coupon rate of 5.875%, with a non-call period of 7.25 years. What distinguishes this financial instrument is its hybrid nature, combining debt and equity characteristics. Moody's treats the bonds as 50% equity and 50% debt, improving the company's credit profile without diluting existing shareholders' stakes. The bonds received a "Baa3" rating from Moody's, one notch below Aldar's corporate rating of "Baa2" with a stable outlook.

Hybrid Bonds: A Smart Financing Tool

Hybrid bonds are sophisticated financial instruments that provide companies with greater flexibility in capital management. Unlike traditional bonds, these instruments give the issuer the option to defer coupon payments without triggering a default event. Additionally, they are partially treated as equity by credit rating agencies, improving leverage ratios and preserving the company's ability to access senior debt for future growth financing.

For investors, these bonds offer higher yields than traditional senior bonds, in exchange for accepting additional risks associated with their subordinated status (meaning senior bondholders have priority in liquidation scenarios). However, Aldar's strong investment-grade rating, high liquidity of AED 29.7 billion (as of September 2025), and position as a strategic partner to the Abu Dhabi government significantly mitigate these risks.

Strategic Implications and Future Outlook

Aldar's ability to raise this substantial amount on competitive terms - achieving one of the tightest pricing spreads for hybrid corporate bonds in the CEEMEA (Central and Eastern Europe, Middle East, and Africa) region - reflects the global financial market's confidence in the UAE's economic growth trajectory. It also signals the maturity of Abu Dhabi's capital markets and their capacity to attract significant international capital for long-term development projects.

Commenting on the issuance, Faisal Falaknaz, Chief Financial and Sustainability Officer at Aldar, stated that "the strong demand for our hybrid issuance affirms investors' deep confidence in the Group's creditworthiness and disciplined financial strategy," adding that this move "provides us with the flexibility needed to continue executing our priorities and expansion projects with confidence, leveraging the strong momentum in our business."

The issuance is expected to close on January 14, 2026, structured under Regulation 144A and Regulation S, with Citibank serving as sole structuring advisor, global coordinator, and joint bookrunner. A consortium of leading regional and international financial institutions participated as joint lead managers and bookrunners.

Source: Press release from Aldar Properties

5 FAQs: Understanding Aldar's Hybrid Bond Deal

1. What are hybrid bonds and how do they differ from traditional bonds?

Answer: Hybrid bonds are financial instruments that combine characteristics of debt (bonds) and equity (shares). Unlike traditional bonds that are purely debt, hybrid bonds are treated partially as equity by credit rating agencies. In Aldar's case, Moody's treats these bonds as 50% equity and 50% debt.

Key difference: The issuing company can defer interest payments without triggering a default event, and they are subordinated, meaning that holders of senior bonds receive their claims first in liquidation scenarios. In exchange for these additional risks, they offer higher yields than traditional bonds (5.95% for Aldar's issuance).

2. Why did the deal achieve "tight pricing spreads" and why does this matter?

Answer: "Tight pricing spreads" means that the difference between the yield demanded on these bonds and the yield on benchmark government securities (typically U.S. Treasury bonds) was very narrow.

What this means:

• Investors perceive low risk in investing in Aldar
• High confidence in the company's creditworthiness
• Aldar was able to borrow at relatively low cost
• Indicator of UAE real estate market strength and international investor confidence

In other words: The tighter the spread, the better the borrowing terms for the company, reflecting strong market confidence.

3. Why does Aldar need to raise an additional $1 billion?

Answer: Aldar is executing an ambitious growth strategy requiring substantial investments across several areas:

1. Land bank expansion: Acquiring new land in strategic locations (the company currently owns 62 million square meters)

2. "Develop-and-hold" assets: Building income-generating real estate projects (shopping centers, offices, hotels) rather than simply selling upon completion

3. Strategic acquisitions: Acquiring complementary companies or projects (Aldar previously acquired London Square in the UK and a stake in SODIC in Egypt)

4. Debt structure optimization: Replacing older debt with less competitive terms with newer, cheaper financing

Context: This is the second hybrid issuance in one year, bringing total financing raised in 2025 to $5.1 billion. This indicates a major expansion plan supported by Abu Dhabi's Economic Vision 2030.

4. What makes foreign investors confident in investing in an Emirati company's bonds at this scale?

Answer: Several factors drive global investors' confidence in Aldar:

1. Strong credit rating:

• Baa2 corporate rating from Moody's (investment grade)
• High liquidity: AED 29.7 billion in cash

2. Government partnership:

• Aldar is a key partner to the Abu Dhabi government on major projects
• Executes citizen housing and infrastructure projects
• Implies implicit support from a resource-rich government

3. Track record:

• Investment asset portfolio exceeding AED 47 billion
• Geographic diversification (UAE, UK, Egypt)
• Consistent revenue and profit growth

4. Strong real estate market:

• Abu Dhabi and Dubai experiencing exceptional demand growth
• Property prices rising consistently
• Supportive government policies (long-term visas, foreign ownership)

5. Attractive yields:

• 5.95% yield in a volatile interest rate environment
• Higher than many government bonds with acceptable risk

Evidence: Demand exceeded $4.2 billion (4× issuance size) from 3 different continents.

5. How does this deal affect Aldar's existing shareholders?

Answer: The impact is positive, for the following reasons:

✅ No dilution:

• Hybrid bonds are debt, not new shares
• Existing shareholders maintain their ownership percentages
• No new shares issued that would reduce existing stakes

✅ Improved credit profile:

• Treating 50% of the bonds as equity improves leverage ratios
• Maintains strong investment-grade rating
• Allows for additional senior debt in the future on favorable terms

✅ Growth financing:

• Proceeds used for profitable expansion projects
• Increases asset value and future revenues
• Potentially raises share price over medium/long term

Bottom line: Shareholders benefit from growth financing without dilution, while improving the company's financial profile.