Bloomberg/Kuwait

 

Kuwait Projects Co’s bonds are on course for a seventh straight month of gains on bets the investment firm’s planned share sale of its pay-TV unit will help it reduce debt.

The yield on Kuwait’s biggest privately owned investment company’s securities due in July 2020, fell 11 basis points this month to 4.62% on Thursday, bringing the decline since the streak began to 155 basis points, according to data compiled by Bloomberg. The drop reduced the yield spread with the JPMorgan Chase & Co Middle East Bond Index to 52 basis points on April 22, the narrowest in more than 10 months.

Investment companies in Opec’s third-biggest producer are recovering after the global credit crisis led some, including Investment Dar Co, to default on debt. Kipco, as Kuwait Projects is better known, said on March 31 it plans to start the process of an initial public sale of Orbit Showtime Network within weeks, joining Dubai’s Emaar Properties and Saudi Arabia’s Public Investment Fund in seeking to tap Middle Eastern markets.

If the sale “is well received, and I envision it to be, the bonds should tighten” further, Ahmed Shaheen, associate director for fixed-income sales and trading at Exotix Partners in Dubai, said by e-mail on Monday. The sale “will definitely boost Kipco’s liquidity and effectively reduce their net debt,” he said.

Dubai-based investment bank Arqaam Capital Ltd in November raised its estimate of OSN’s value to $4.3bn from $2.5bn and said an initial public offering will “unlock the hidden value embedded in the pay-TV operations.” Kipco owns 60.5% of OSN.

The operator, which offers subscription-based television services in the Middle East and Africa, is forecast to double revenue in the next three years from $700mn currently, Kipco’s Vice Chairman Faisal al-Ayyar said last month.

Kipco posted a 27% increase in 2013 profit to 40.1mn dinars ($143mn), according to data compiled by Bloomberg. The shares have gained 27% this year.

Not all analysts see debtholders benefiting from the potential IPO.

The share sale could be “negative” for Kipco’s bondholders if proceeds are distributed to equity holders, Amol Shitole, a credit analyst at SJ Seymour Services Pvt in Bangalore, India, said by e-mail on Monday. “We don’t expect Kipco’s bond yields to change significantly from the current levels” in the event of an OSN share sale, he said.