A US$7 billion (Dh25.71bn) bond sale by Qatar should trigger a rush of issuances by companies throughout the region, bankers say. Companies in the Gulf are already lining up to sell debt after what is thought to be the largest offering from an emerging market government on record. "This (Qatar) bond will carry tangible fruits for banks and corporations in the region," said Mohieddine Kronfol, the managing director of Algebra Capital in Dubai.
"In the next few months this will facilitate access for them and they will follow suit. This confirms how positive a proactive role by governments to re-establish access to financial markets can be." Several regional banks have started tapping into pent-up demand by international investors for regional debt offerings. First Gulf Bank, based in Abu Dhabi, may issue a $500 million bond as early as next week, while Emirates NBD, the largest UAE bank by assets, also started meeting investors for its imminent debt sale, bankers say. National Bank of Abu Dhabi issued a $850m bond last month.
Qatar sold $3.5bn of five-year bonds to yield 185 basis points above US Treasuries; $2.5bn of 10-year bonds to yield 195 basis points more than Treasuries; and $1bn of 30-year bonds yielding 215 basis points above Treasuries. Qatar has been pouring billions of dollars into infrastructure development to diversify its economy away from hydrocarbons. It has become a serious player in the international transport, education, finance and tourism, and a committed investor with a wide range of assets abroad.
Investors had asked for almost $30bn of the Qatar debt issue, said Adel Afiouni, the co-head of global securities for Credit Suisse in the MENA region, which co-led the sale. The bond was evenly distributed between investors in the Middle East, Europe and the US, Mr Afiouni said. "This makes it clear that there is strong appetite from international investors for Middle East credit," he said. "There is still a scarcity out of the region in terms of asset allocation and quality of assets. And there is still more room for growth."
Dubai plans to sell $10bn of debt by the end of this year, the second half of a bond programme that is helping state-related companies through the credit crisis. The first $10bn issued in February this year was fully underwritten by the Central Bank. Qatar has bucked the regional recession and its economy may expand by as much as 11.5 per cent this year, the IMF has said. It plans to almost double its gas exports by the end of next year.
The Qatar debt sale came only weeks after Dubai issued $1.25bn of five-year notes to yield 406 basis points above Treasuries. Several Dubai Government-related entities are preparing new bond issues, Standard Chartered has said. They could include companies such as Emirates Airways, the Roads and Transport Authority and the Dubai Electricity and Water Authority. Qatar, the biggest global exporter of liquefied natural gas, will use the bond proceeds to provide "contingency funding" for state-owned firms, pay for infrastructure projects and invest in the international oil and gas industry, it said in its prospectus.