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 2022 soccer World Cup.
The company formerly known as Qatar Telecom plans to hold investor meetings this week before a potential dollar- denominated sale. The last Shariah-compliant corporate issue from Qatar was the $215mn 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 $138bn 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 Services Pvt.
“They’re waiting to see how Ooredoo does,” Mohammed Ghiyath Sheikhah, first manager for international investment and finance at Doha-based International Islamic, said by phone November 21. “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 $500mn sale last month.
“Raising money with sukuk structures regionally you get better pricing than with conventional bond structures,” Shitole said by phone from Bangalore November 21. “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 telecom major sold a further $1.25bn the same month.
The company may pay a rate of about 3.2% for five- year notes, Shitole said. Sheikhah expected bonds of that tenor to price at about 3%. The issue will be Ooredoo’s first Islamic bond.
The Doha-based company is looking for acquisition opportunities, chief executive officer Nasser Marafih said in October.
Some Qatari companies might be hesitant to follow Ooredoo’s lead because of the added complexity of selling an Islamic bond and the ease of securing funds, Sheikhah said.
“The sukuk structure requires some paperwork that companies don’t like to do,” he said. “They have to put in assets and do a lot of legal work. And companies currently have no problems getting funding elsewhere, so they don’t want to go through the process.”
Bank loans in Qatar will increase about 20% in the two years ending 2014 as the economy grows 6.8% next year after 6.5% in 2013, QNB said in a report last month.
Only the Qatar government, Almana and two Islamic banks have sold dollar-denominated sukuk from the country since May 2008, according to data compiled by Bloomberg. The Ooredoo issue would be the first since International Islamic raised $700mn in October 2012.
Ooredoo, rated the six-highest investment grade at Standard & Poor’s, has almost $1.87bn of debt due next year, according to data compiled by Bloomberg. Shitole expects a sale of as much as $2bn as the company prepares to make the payments.
About $18.1bn of sukuk have been sold in the GCC in 2013. A record $21.3bn were issued last year. Dubai Investments and ACWA Power International have said they may tap the Islamic market by the end of the year.
“Ooredoo could really boost the GCC sales league table for the year,” Shitole said. “We might even cross last year’s record.”