Doha-based investors refused bold allocations in US$3 billion debt sale, sources say
Bahrain said to turn away Qatari investors from bond sale
Bahrain refused to process bids by Qatari investors for its largest-ever bond offering after cutting ties with the gas-rich Gulf state in June, according to two people familiar with the matter.
Doha-based companies that submitted bids for Bahrain’s US$3 billion debt sale last week weren’t given allocations because the island state, along with other Gulf economies, are cutting their financial exposure to Qatar, the people said, asking not to be identified because the matter is private. The Bahraini government didn’t send a formal directive to arrangers about Qatari bids, a third person said.
Bahrain last week completed a three-tranche issue after receiving bids worth $15bn. The sale was the first by a Gulf sovereign since Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic relations and closed transport routes with Qatar on June 5, accusing the nation of funding terrorism, a charge it denies. Some banks in those countries have since cut their exposure to Qatar amid concerns of a widening of the standoff.
The rift has impacted bond sales in the Gulf amid concerns that regional political risk is increasing, pushing many issuers to consider private placements and syndicated loans instead. Gulf issuers raised $8.3bn so far this quarter, down from $18.8bn in the three months ending June 30, according to data compiled by Bloomberg.
Bahrain, like other oil-exporting countries across the region, has made repeated use of international debt markets to bolster public budgets since energy markets slumped. Bahrain’s fiscal deficit reached 15 per cent of economic output last year.
Moody’s Investors Service in July cut Bahrain’s rating to B1, four levels below investment grade, saying it expects the government’s debt burden and affordability to deteriorate significantly over the next two to three years. The country is also rated junk by S&P Global Ratings and Fitch Ratings Ltd.
JPMorgan Chase, Citigroup, BNP Paribas, Gulf International Bank and National Bank of Bahrain arranged the offering, with maturities ranging from seven to 30 years.
The Central Bank of Bahrain didn’t immediately respond to calls seeking comment, while the Ministry of Finance didn’t respond to an email. Citigroup declined to comment, while JPMorgan, BNP, Gulf International and National Bank of Bahrain didn’t respond to emails.