Gulf borrowers turn to private bonds as sales surge

Gulf borrowers are increasingly turning to privately-placed sovereign bonds for funding following a 32 per cent rise in year-to-date sales, according to reports.

Private transactions are seen as a means of avoiding public documentation and the marketing process of regular bond sales

Bloomberg noted a jump in transactions outside of the public eye, citing National Bank of Abu Dhabi’s head of debt origination Andy Cairns as saying it had helped manage 100 times more private deals so far this year than 2015.

“We have seen a significant uptick in the volume of private placement issuance,” he was quoted as saying, describing them as “a discrete means of accessing under-the-radar liquidity, albeit at higher cost, without contaminating their public curves.”

The International Monetary Fund expects fiscal deficits in the GCC region to reach almost $900bn by 2021.

Bloomberg said crude-exporters were rushing for funding before the US Federal Reserve raises interest rates and the Ramadan month slows business activity.

The news service reported bond sales had climbed 32 per cent to-date this year to $15.9bn, following a $569m privately placed Sukuk by Dubai’s government in March and $499m raised by local bank Emirates NBD.

It also cited sources as saying Bahrain had tapped the dollar-bond market for the second time in three months with a $435m privately placed Sukuk and Oman’s government was marketing a private benchmark dollar-denominated security.

“Over the last year we have and are advising on issuances with a potential aggregate value of just short of $1bn across about ten transactions. It was a very active year and that’s continued into the first quarter,” law firm King & Spalding’s Dubai-based partner Rizwan Kanji told the news service.

Cairns was quoted as saying private placement were being issued almost exclusively by regional banks that recognise their funding costs are higher due to investors prioritising sovereign and corporate debt.