There is an important credit dimension to Wednesday's announcement that ATIC, the Abu Dhabi government-owned technology investor, has been formally merged into Mubadala, the sovereign investment fund: ATIC, which owns the Globalfoundries chip-making business, is now very solidly under the credit guarantee of the Abu Dhabi government.
While most Abu Dhabi government-backed ventures are considered by the market to have the implicit guarantee of the state - and by connection, its enormous oil reserves - only four have been explicitly named by the government as guaranteed, and Mubadala is one of them. (The other three are the diversified energy investor IPIC, developer TDIC and energy company Taqa.)
As Moody's said in a note following the announcement:
The transfer of ownership, in our view, underlines once more the government's extremely strong commitment to Mubadala. The government has shown a strong track record of support for Mubadala, including regular, sizable equity injections to fund Mubadala's acquisitions and investments, as well as other business support, such as land grants and project sourcing. As a wholly owned entity of Mubadala, the budgetary requirements of ATIC, stemming also from its sizable investment program, will be incorporated into Mubadala's annual budget submission to the government.
That means ATIC, and by extension Globalfoundries - which is building a $4.6bn microchip factory in upstate New York and plans to build another in Abu Dhabi - now has access to some of the cheapest financing in the chip industry. The Abu Dhabi government budget (details of which remain largely unpublished) is a nice place to get your financing from, and if the company heads to the markets, it does so with Mubadala's AA credit rating behind it.
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