Trump election win delays planned MidEast sukuks, bonds

Islamic Development Bank’s planned issue in excess of $1bn delayed to assess impact on regional bond market

The unexpected victory of Donald Trump in the US presidential election last week caused the Islamic Development Bank - as well as other potential debt issuers in the Middle East - to wait a bit longer to assess the impact of the billionaire’s victory on the regional bond market, bankers have said.

The Islamic Development Bank (IDB) will announce this week plans for investor roadshows covering its planned sukuk sale, bankers familiar with the situation said.

The issue, expected to be in excess of $1 billion, is one of the few remaining debt sales likely to be completed in the Middle East before the end of this year, as the window to prepare new bonds shrinks and as market volatility puts investors in a defensive mode, bankers and investors said.

The IDB did not respond to an emailed request to comment. It mandated nine banks for the Islamic bond sale in late October, with the aim of issuing the sukuk after the US elections on November 8.

"The deal would have gone out earlier if Clinton had won," said one banker.

Some Middle Eastern bond transactions for which banks had already been mandated have been put on hold because of the market turmoil caused by Trump's win, and new mandates for issues that could have taken place after a Clinton victory have been frozen, bankers said. Potential borrowers have decided to wait until January to see how markets perform.

An interest rate hike by the US Federal Reserve Bank in December seems likely, and the market has already priced that in, "so what's the advantage in issuing now rather than in January?" said the banker.

"Rate changes or not, the lack of direction is the main problem" in the wake of Trump's victory, said a Dubai-based fixed income portfolio manager.

In addition to the IDB, Abu Dhabi airline Etihad is also expected to launch a sukuk issue soon, likely to be in the $1 billion region. The bond, a private placement, is expected to be executed later this week, bankers said.

IDB is rated AAA by Moody's, Standard & Poor's and Fitch. It sold its last US dollar-denominated sukuk in March this year, raising $1.5 billion offering an interest rate of 50 basis points over mid-swaps.

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