Bahrain sukuk priced at lower end of expectations

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BAHRAIN SUKUK: Indicated pricing of sovereign issue comes in at the low end of expectations. (Getty Images)

The indicated pricing of Bahrain's sovereign sukuk issue, seen as an important gauge for the battered Gulf Arab sukuk market, has come in at the low end of expectations, an expert said on Monday.

Bahrain is to issue a benchmark-sized five-year dollar sukuk at initial guidance of a spread of 350 basis points over US Treasuries, an official at one of the lead managers said earlier.

Mohieddine Kronfol, managing director at Dubai-based asset management company Algebra Capital, said the indicated pricing came in at the low end of his expectations.

"It would have been better had they left some juice in there to attract a wider audience," he said.

He added that tight pricing would limit the liquidity of the issue.

The Gulf Arab fixed-income markets lack a strong secondary market, with most sukuk being held until maturity by investors.

"They would have been better being more generous to ensure secondary trading and liquidity, for the long-term interest of the region," he said.

He added the issue was unlikely to serve as a benchmark pricing to corporates for longer than a few weeks.

Global sukuk markets in 2008 slumped some 56 percent from 2007 to $14.9 billion, according to Standard & Poor's.

The Gulf Arab sukuk market meanwhile has been lying largely idle during the first months of 2009, with corporates looking to sovereign issues to help them gauge investors' appetite.

Kronfol said the issue would be a success regardless of pricing, as Islamic banks in the region have enough liquidity to absorb it.

Calyon, Deutsche and HSBC are lead managers of the sukuk issue.

Bahrain's central bank has said the country plans a $500 million issue. (Reuters)

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