Qatari state-linked firms eye $3-4bn in bonds

QATAR BONDS: State-linked firms expected to issue $3-4 billion worth of bonds this year. (AFP)

Qatari state-related firms are expected to issue $3 billion to $4 billion in bonds in 2009 to refinance existing debt and fund new projects, after a government benchmark bond paved the way, a member of the State Finance Policy Committee has said.

State and corporate issuers in the Gulf Arab region have raised more than $7 billion by issuing bonds over the last three months in a new trend as spreads have narrowed and demand has grown for high-grade emerging market bonds.

"We know some of these state-related entities plan to raise financing from the market," committee member Abdul-Rahman al-Shaibi told Reuters in an interview on Sunday. "This could be anywhere between $3 and $4 billion for state-related companies this year."

State-controlled Qatar Telecommunications Co (Qtel) said last week it planned to issue up to $5 billion in bonds partly to help refinance debts, without giving a time frame.

The Qtel bond sales come after Qatar, the world's biggest exporter of liquefied natural gas, and Abu Dhabi, each raised $3 billion by issuing sovereign bonds in late March and early April.

Qatar's benchmark bond included a $2 billion 5-year note yielding 340 basis more than comparable US treasuries and a $1 billion 10-year note yielding 380 basis points more than comparable US treasuries.

Shaibi did not rule out the possibility of issuing more sovereign bonds as part of a government strategy to secure good pricing for outstanding bonds and narrow spreads.

"If the government feels that we should accelerate our strategy to issue more bonds this year, we will do that."

Part of Qatar's $3 billion issue, the first bond sale since 2000 and the biggest in the country's history, was used to redeem a $1 billon 10-year bond that matured in May, he added.

"The other reason for the bond issue is to re-open the international bond market for Qatar because credit spreads had gone up significantly," Shaibi said.

"Qatar's secondary market bonds were relatively illiquid and were not reflecting the right pricing."

Tight lending and high costs of bank funding are encouraging Gulf Arab issuers to tap the debt markets, said Mark Waters, the head of debt capital markets Middle East at BNP Paribas.

"Given the ongoing capital constraints and high funding costs facing financial institutions, there is currently very little liquidity within the syndicated loan market in the GCC," said Waters.

"As a result, there will undoubtedly be the need for companies to focus on an alternative investor base hence the stronger focus on debt capital market issuance."

Some of the funds raised through the sovereign bond issue could be used to help state-related entities meet their financing needs, Shaibi said.

Shaibi did not rule out the possibility of issuing Islamic bonds, or local-currency bonds, as part of a long-term strategy to diversify the government's financing needs. (Reuters)

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