No specific details about bond's size provided, but could be at least US$500m
Bahrain, the Gulf Arab state hit by ongoing social unrest, plans to issue a benchmark-sized 10-year dollar bond this week, lead arrangers said, after testing investor appetite in roadshows that conclude on Tuesday.
Initial price guidance for the issue, which appears to be a single-tranche deal, was at a spread of 462.5 basis points over midswaps.
At current swap prices, that equates to a coupon of 6.375 percent; 10-year midswaps were quoted at 1.75 percent on Tuesday.
Bahrain had initially looked to sell a US$1bn conventional bond at the beginning of 2011 but was forced to postpone plans due to political unrest in the country.
Analysts have said the need to attract conventional investors with the new bond, rather than Islamic investors facing a very limited supply of sukuk, meant Bahrain would have to be fairly generous in pricing the debt.
Arranging banks said a bond issue may follow this week.
No specific details about size were provided, but benchmark-sized is normally understood to mean at least US$500m.
JP Morgan Chase, Citigroup, Standard Chartered and Gulf International Bank are mandated arrangers for the deal, which will be a conventional issue and structured under a 144a-compliant format, open to US investors.
A 10-year issue should also appeal to long-term institutional investors in the West; the traditional sweet spot for regional investors is usually only a five-year tenor.
Bahrain's last bond issue was a US$750m 7-year Islamic bond, or sukuk, which was priced to yield 6.273 percent.
Market conditions are widely believed to be more conducive for another debt markets outing now. The 7-year sukuk was yielding 4.8 percent on Tuesday, indicating there is demand for the paper.
Bahrain's credit default swaps (CDS), or the cost to insure its debt against default, were bid at a midspread price of 352.6 basis points on Tuesday, about 10 basis points tighter than the beginning of June, according to Thomson Reuters data.