On April 7, Qatar issued $10bn in bonds thus becoming the first sovereign from the Gulf Co-operation Council region to successfully return to the international debt markets.
The $10bn Eurobond sale, split in tranches of 5, 10 and 30 years, offered attractive premium over existing bonds and saw a huge demand from many investors from Asia, Europe, the US as well as the Middle East and North African (Mena) region.
The transaction generated an aggregate order book peaking at about $45bn, which clearly reflects investor confidence in Qatar, one of the few ‘double-A rated’ economies in the world.
Qatar is also the world’s biggest exporter of liquefied natural gas (LNG). Last year, Qatar decided to scale up its liquefied natural gas (LNG) production capacity to 126mn tonnes per year (tpy) by 2027.
Through the successful bond issuance the State of Qatar (Aa3/AA-/AA-) has thus reopened the capital markets for the region, post the recent global disruptions.
The demand generated by the deal (in excess of $45bn) is seen as a sign of strong investor appetite despite a plunge in crude prices that pushed up borrowing costs for governments of the oil-producing region.
A GCC-based fund manager said that the deal was “successful” given its size, according to Reuters.
To help finance the economic and fiscal shortfall this year, many analysts believe other governments in the region could follow Qatar soon, but with less solid credit ratings may face weaker investor demand.
According to Oxford Economics, the Qatar bond was significant for two major reasons. First, it offered attractive premium over existing bonds, and second, it saw high demand.
In 2018, Qatar became the first sovereign in the world to issue Formosa bonds listed on the Taipei stock exchange and the new 2050 bonds are expected to be dual listed on both the Luxembourg and Taipei stock exchanges.
According to Reuters, Qatar hired Barclays, Credit Agricole, Deutsche Bank, JPMorgan, QNB Capital, Standard Chartered, and UBS to arrange the debt sale.
“Almost every economy will contract this year, and Qatar has done well with crisis management in the past ten years,” said Richard Segal, a senior investment analyst at Manulife Asset Management, referring to the lower oil prices that will have “a significant impact” on state revenues and financial conditions.
“Thus, I don’t think investors will be too concerned,” he said.
“Qatar is double-A rated and now offers yield, which we could only dream of a couple months back,” Carl Wong, head of fixed income at Avenue Asset Management Ltd. in Hong Kong told Bloomberg.
Some investors are also seeing Qatar’s as a “dream bond”. They say yields are attractive for the double-A rated nation, and the issuance also indicates that emerging bond markets are re-opening up after the March global turmoil.
The issue, therefore, is expected to generate favourable demand and open the door for more regional bond sales.
