Qatar raises $9bn in Middle East’s biggest bond sale

Qatar sold $9bn of Eurobonds, marking the biggest-ever bond issue from the Middle East where governments are tapping international investors to fill budget holes left by declining oil and gas revenues.

The country borrowed across three maturities, selling $3.5bn in five-year notes at 120 basis points over US Treasuries, the same amount in 10-year bonds at 150 basis points over Treasuries and $2bn of 30-year paper at a 210 basis-point spread, according to a person familiar with the transaction.

The amount is almost double the $5bn that bankers close to the deal said Qatar was targeting.

The deal follows a $5bn Eurobond from Abu Dhabi last month with Middle Eastern sales this year now amounting to almost $30bn if Qatar’s is included.

Energy-exporting nations are borrowing internationally following a halving of oil prices since 2014 which has forced some governments to raid reserves. Qatar is also in the second year of a $200bn infrastructure upgrade ahead of hosting the 2022 FIFA World Cup.

“It’s quite surprising they printed so much,” said Angelo Rossetto, a trader at GMSA Investments Ltd. in London, who bid for the bonds. “Qatar printed nearly double expectations but left pricing on the generous side.”

Abu Dhabi’s sale included a tranche of five-year debt at a spread of 85 basis points last month. This is the first sale in four years from Qatar, the world’s largest exporter of liquefied natural gas.

The nation’s budget deficit will widen to 5.2% of national output this year, according to the median forecast of eight analysts surveyed by Bloomberg.

Saudi Arabia, also planning a bond issue, will now “have to offer a very generous premium” to investors after Qatar has flooded the market, according to Sergey Dergachev, a senior money manager helping run $13bn of emerging-market debt at Frankfurt-based Union Investment Privatfonds GmbH, who bought the bonds.

Moody’s Investors Service rates both Qatar and Abu Dhabi Aa2, the third-highest investment grade.

HSBC Holdings Plc, JPMorgan Chase & Co., Mitsubishi UFJ and QNB Capital LLC are acting as coordinators on the Qatar sale, said the person who isn’t authorised to speak publicly and asked not to be identified.

Courtesy: bloomberg.com