x Abu Dhabi, UAETuesday 25 July 2017

Ooredoo poised to end Qatar’s Islamic bonds drought

The company formerly known as Qatar Telecom plans to hold investor meetings this week before a potential dollar-denominated sale.

Ooredoo, the biggest phone operator in Qatar, is poised to end the country’s two-year drought of corporate Islamic bond sales, paving the way for further issues from the host of the Fifa World Cup 2022.

The company formerly known as Qatar Telecom plans to hold investor meetings this week before a potential dollar-denominated sale. The last Sharia-compliant corporate issue from Qatar was the US$215 million sale from Almana Group in June 2011, according to data compiled by Bloomberg. Six dollar sukuk have been sold from the country in the past five years.

Qatar’s government and companies are tapping debt markets as the nation embarks on $138 billion of investments by 2016. The world’s biggest exporter of liquefied natural gas plans to build hotels, stadiums, roads and railways as it prepares for the World Cup. Less prominent Qatari borrowers may use the sale to gauge investor demand for further issues, said Amol Shitole, India-based credit analyst at SJ Seymour Service.

“They’re waiting to see how Ooredoo does,” Mohammed Ghiyath Sheikhah, first manager for international investment and finance at Doha-based Qatar International Islamic Bank, said. “They want to do it because the sukuk market is such a liquid market.”

Companies are typically receiving demand for their bond issues that far exceeds the amount on offer. Islamic investors placed orders worth $6.3bn for Abu Dhabi-based Al Hilal Bank’s $500m sale last month.

The average yield for sukuk in the six-nation Gulf Cooperation Council has increased 80 basis points this year to 3.72 per cent on November 22, according to HSBC/Nasdaq Dubai indexes. That compares with a 85 basis-point jump to 4.13 per cent for the yield on non-Sharia compliant bonds, the indexes show.

“Raising money with sukuk structures regionally you get better pricing than with conventional bond structures,” Mr Shitole said. “People are very comfortable with the Ooredoo story and historically their bonds get huge demand.”

Ooredoo received $15bn of orders for a dual-tranche $1.5bn bond sold in October 2010. Encouraged by the demand, the phone operator sold a further $1.25bn the same month.

The company may pay a rate of about 3.2 per cent for five- year notes, Mr Shitole said. Mr Sheikhah expected bonds of that tenor to price at about 3 per cent. The issue will be Ooredoo’s first Islamic bond, which complies with the religion’s ban on interest.