x Abu Dhabi, UAEThursday 18 January 2018

Jordan to join bond-offer bandwagon

Governments and companies in the Middle East are jumping on the bond bandwagon, as the region tries to take advantage of a wave of cheap credit to lock in lower interest payments.

Governments and companies in the Middle East are jumping on the bond bandwagon to take advantage of a wave of cheap credit and lock in lower interest payments.

Jordan is preparing for an international bond launch this year, the prime minister Abdullah Ensour told Bloomberg News this month, having passed a law last year paving the way for sovereign sukuk sales.

Jordan was in need of international funding to close a yawning deficit that has grown worse after the Arab Spring, said Mathias Angonin, an associate analyst at Moody's Investors Service.

"Their fiscal deficit has soared," he said. "Because of high oil prices and the interruption of gas imports from Egypt, the country's fuel bill has soared."

Jordan's public finances have deteriorated because of rising energy prices, leading it to request a US$2 billion (Dh7.34bn) standby arrangement from the IMF in July. The government agreed to remove fuel subsidies as a condition for obtaining the credit line.

Jordan first tapped capital markets in late 2010 with a $750 million eurobond paying a coupon of 4.125 per cent, but that rate rose to a high of 6.08 per cent as the Arab Spring hit and protests against the country's government intensified.

As tensions eased, yields have slid to settle at 4.6 per cent yesterday. Bond yields move in the opposite direction from price.

Demand for emerging-market bonds has soared as tensions over the global economy have eased, with a recent sukuk sale by Dubai's Government raising funds at a lower rate than the Italian government pays on its sovereign debts.

With demand for Arabian Gulf credit still high as investors scour the world for yield, Abu Dhabi Commercial Bank is also said to have hired banks in anticipation of a bond sale in the next few weeks.

ADCB has hired JP Morgan, ING, Royal Bank of Scotland and Standard Chartered to arrange a conventional bond sale, Reuters reported.

The move comes after ADCB received approval from the Central Bank to buy back 10 per cent of its issued shares. ADCB said it would proceed with the share buyback in a statement to the Abu Dhabi bourse yesterday.

Middle Eastern bond sales have totalled $3.12bn this year. A record $48.9bn was raised last year.

And Qatar has planned local currency bond issuances this year as part of efforts to develop a yield curve, IMF officials told Reuters.

The country began development of a yield curve, which allows other companies to more effectively price debts, through sales of short-dated treasury bills early last year.

Dubai's recent bond sale, which included 30-year dated debt, put the emirate closer to the development of a yield curve.