Qatar among top sovereign bond issuers in Q2, 18

(8/9/2018 7:36:00 AM)

Led by Qatar and Saudi Arabia, the GCC sovereign bond market witnessed proceeds of $22.9bn during the second quarter of 2018 (Q2, 18) from its two largest sovereign bond issuers.

The $12bn sovereign bond issued by Qatar represents the largest placement by an emerging market sovereign so far this year. On the corporate front, debt activity has been relatively slow.

However, with the recent recovery in oil prices and improvement in government fiscal deficits, sovereign debt issuances are expected to taper in the latter half of 2018, Pwc noted in its second quarter “GCC Capital Markets Watch”.

The State of Qatar issued a bond which is consisted of three tranches: a $3.0bn 5 year tranche, a $3bn 10-year tranche and a $6bn 30-year tranche. In addition, the Government of Saudi Arabia issued a triple-tranche bond total valued $10.9bn.

Oman Telecommunications Company issued a secured note in two tranches: a $600m, carrying a 5.63 percent coupon, maturing in 2023; and a $900m, carrying a 6.63 percent coupon, maturing in 2028.

Investors continued to tread cautiously in the GCC equity markets in Q2 2018, closing the first half of 2018 on a muted note, with total of 9 IPOs (including 8 REIT listings) generating total proceeds of $893m in H1 2018, compared to $610m raised from 15 IPOs in the first half of 2017.

The increase in total proceeds is mainly due to the two large REIT IPOs namely Sedco Capital REIT ($173m) and Bonyan REIT ($174m). The future trajectory of GCC equity markets will continue to depend on geopolitical developments, stability of oil prices and the implementation of ongoing government reform policies and related privatisation initiatives across the GCC region.

“The uncertainties in the macroeconomics mean that the IPO window is narrower than it has been in the past. It is more important than ever for companies interested in capital markets funding to get ready early to capture the opportunity when it arrives”, noted Steve Drake (pictured), PwC Middle East Capital Markets Leader.

European debt markets have been sluggish, with overall volumes and issuances remaining flat in this quarter. The looming global trade wars, a stronger dollar and oil prices, and concerns over liquidity in the secondary market have affected investor sentiment.

“We have seen a number of deals being pulled this quarter as corporates await the right window of opportunity”, Steve added. Globally, the IPO offering value has increased by 7 percent despite a 25 percent reduction in the number of IPOs, compared to the same quarter last year. The performance of IPOs is lower this year, mainly driven by China softening.

The global IPO pipeline looks promising but the global headwinds and ensuing market volatility could affect the successful conversion of the pipeline.

The Peninsula