The consortium that acquired a stake in the Abu Dhabi gas pipeline network is refinancing its bank debt in the bond market. In July 2020, Galaxy BidCo purchased a 47.7% interest in ADNOC Gas Pipeline Assets (AssetCo), financed via an US$8 billion bridge loan with 17 banks. These were SMBC, First Abu Dhabi Bank, Abu Dhabi Commercial Bank, Santander, BNP Paribas, HSBC, Mizuho, Standard Chartered, MUFG, Societe Generale, Citi, Credit Agricole, Natixis, Emirates NBD, Samba, CaixaBank and DBS Bank.

Galaxy recently mandated Citigroup and HSBC as global coordinators for a multi-tranche global offering of US dollar bonds, to take out the bridge loan. The deal will also feature BNP Paribas, First Abu Dhabi Bank, Mizuho, MUFG and Standard Chartered Bank as joint bookrunners.

On October 22 Moody's Investors Service assigned an Aa2 rating to the senior secured amortizing bonds to be issued by Galaxy Pipeline Assets Bidco Ltd (Galaxy BidCo). The rating agency said the proceeds of the bonds will be used to refinance existing bank debt, pay hedge break costs and associated fees that, in total, currently amount to about US$8 billion.

Galaxy BidCo is a special purpose vehicle incorporated under the laws of Jersey, and is 100% owned by funds managed by Government of Singapore Investment Corporation (GIC), NH Investment & Securities Co., Ltd (NHI&S), Brookfield Asset Management, Global Infrastructure Partners (GIP), Ontario Teachers' Pension Plan Board, and Italian company Snam, whose core business is the ownership and management of natural gas infrastructure.

ADNOC controls 51% of the shares in AssetCo through its 80% owned subsidiary ADNOC Gas Pipelines HoldCo.

"The Galaxy BidCo bonds will refinance debt raised to partly fund the purchase of a share of critical gas pipeline assets for Abu Dhabi, and the credit benefits from risk transfer to ADNOC," says Christopher Bredholt, Moody's vice president, senior credit officer and lead analyst for the issuer. "The sale of a minority interest to institutional investors is consistent with ADNOC's stated strategy to unlock value in its midstream assets while retaining operational control."

AssetCo, a limited purpose entity under the laws of Abu Dhabi and the United Arab Emirates, entered into a 20-year agreement (expiring in June 2040) with Abu Dhabi National Oil Company (ADNOC) to lease a network of 38 onshore pipelines covering 982.3 kilometres in Abu Dhabi.

AssetCo has also entered into a 20-year pipelines use and operation agreement with ADNOC, under which ADNOC pays a fixed  tariff with a ship-or-pay minimum volume commitment (MVC) and ADNOC is responsible for operations and maintenance at its own cost. The pipelines have an aggregate gross nameplate capacity of 10.5 billion standard cubic feet per day of sales and injection gas and 161,314 tonnes per day of natural gas liquids.

According to Moody's, the Aa2 rating on the bonds reflects credit strength which includes the critical strategic nature of the pipelines to ADNOC and the government of Abu Dhabi, and the high predictability of revenue under a long-term pipelines use and operation agreement.