Gulf Borrowers Turn to Private Bonds, Sales Surge
Gulf bond sales have increased by 33% so far this year
Gulf borrowers are increasingly turning to privately-placed sovereign bonds for funding following a 32% rise in YTD sales, according to reports.
Private transactions are seen as a means of avoiding public documentation and the marketing process of regular bond sales
A jump in transactions outside of the public eye, citing National Bank of Abu Dhabi’s head of debt origination Andy Cairns says it had helped manage 100X more private deals so far this year than Y 2015.
“We have seen a significant uptick in the volume of private placement issuance,” he was quoted as saying, describing them as “a discrete means of accessing under-the-radar liquidity, albeit at higher cost, without contaminating their public curves.”
The International Monetary Fund expects fiscal deficits in the GCC region to reach almost $900-B by Y 2021.
Crude Oil-exporters were rushing for funding before the US Fed raises interest rates and the Ramadan month slows business activity.
The news service reported bond sales had climbed 32% YTD this year to $15.9-B following a $569-B privately placed Sukuk by Dubai’s government in March and $499-M raised by local bank Emirates NBD.
It also cited sources as saying Bahrain had tapped the USD-bond market for the 2nd time in 3 months with a $435-M privately placed Sukuk and Oman’s government was marketing a private benchmark USD-denominated security.
“Over the last year we have and are advising on issuance’s with a potential aggregate value of just short of $1-B across about 10 transactions. It was a very active year and that’s continued into Q-1,” law firm King & Spalding’s Dubai-based partner Rizwan Kanji said.
Mr. Cairns was quoted as saying private placement were being issued almost exclusively by regional banks that recognize their funding costs are higher due to investors prioritizing sovereign and corporate debt.
By Robert Anderson
Paul Ebeling, Editor