Gulf debt market shows signs of recovery as issuers line up

DUBAI- Several Gulf issuers, including Abu Dhabi state fund Mubadala and the Saudi-headquartered Arab Petroleum Investments Corp (APICORP), will likely issue bonds as soon as next week, sources said, signalling a revival in the region's primary debt market.

Public international bond issuances screeched to a halt in late February, with activity only tentatively restarting early last month.

Investment-grade sovereigns Qatar, Abu Dhabi and Saudi Arabia have subsequently raised a combined $24 billion in bonds, though corporates and banks have remained cautious so far.

Two sources said Mubadala and APICORP could issue bonds as soon as next week.

"We are always looking at ways to optimize our capital structure, at the right time in the market and in line with our funding plans," Mubadala's Chief Communications Officer Brian Lott said in response to a Reuters query.

APICORP did not immediately return a request for comment.

Reuters reported last week that Mubadala was in early talks with banks for a potential dollar bond issue. APICORP hired banks last month for a potential issuance, which would have a maturity of three or five years, sources have said.

"When (APICORP) goes is dependent on whether they can get their pricing and the feedback all matches," a source said. "I'm sure that they won't be too far away from coming to the market."

That could be as soon as next week, the source added.

In the corporate space, Saudi Telecom is in talks with banks for a potential issuance, two sources said. The company did not immediately return a request for comment.

Jeddah-based Islamic Development Bank has hired banks to arrange a potential international sale of sukuk, or Islamic bonds, three sources with knowledge of the matter said.

It will likely raise at least $1 billion, one of the sources said. IsDB did not immediately reply to a request for comment.

Junk-rated Bahrain also hired banks on Tuesday to arrange investor calls ahead of a potential dual-tranche dollar bond issue. 

It would mark the first sub-investment grade public bond deal from the region since tumbling oil prices and the spreading coronavirus pandemic led to one of the biggest sell-offs of the region's debt on record.

Qatar National Bank, the Gulf's biggest lender, on Tuesday became the first non-sovereign issuer from the Gulf to launch a public bond issue in the international debt markets, raising $1 billion.

Bankers and fund managers have said large banks and government-related entities would need to return to the public debt markets following last month's sovereign issues in order to re-establish curves for smaller and less-creditworthy lenders and corporates.

"We have seen a stabilisation in the regional fixed income markets following fiscal and monetary support measures announced by governments globally," said Doug Bitcon, head of credit strategies at Rasmala Investment Bank.

"Despite the low oil price, secondary market bid/offer spreads have tightened significantly in the past month and as a consequence primary market activity has started to pick up."




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