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Tue 8 Sep 2020 11:43 AM

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Bahrain eyes dollar bond to help plug budget deficit

The announcement marks the kingdom's return to the international debt market for the first time since May

Bahrain eyes dollar bond to help plug budget deficit

Bahrain has started marketing a three-tranche dollar bond to help plug one of the biggest budget deficits in the world.

The Gulf nation is selling benchmark-size seven-year Islamic bonds as well as conventional debt with a duration of 12 years and/or 30 years, according to a person familiar with the matter, who’s not authorised to speak publicly and asked not to be identified. Benchmark typically means the equivalent of at least $500 million.

Bank ABC, Citigroup, Gulf International Bank, HSBC Holdings, National Bank of Bahrain and Standard Chartered are the lead managers for the sale and will arrange a global investor call on Tuesday.

The announcement marks the kingdom’s return to the international debt market for the first time since May and follows Dubai’s sale of $2 billion in bonds after a six-year absence from the public borrowing market.

In May, Bahrain sold $2 billion in 10-year notes and 4.5-year Islamic securities, becoming the lowest-rated country to sell dollar bonds since the market hiatus triggered by the Covid-19 pandemic.

Bahrain is under fiscal strain despite a $10 billion bailout package pledged by its wealthier neighbours in 2018. The smallest among economies of the six Gulf Cooperation Council members, Bahrain is on course to rack up a deficit that the International Monetary Fund projects will be among the world’s 10 biggest this year at 15.7 percent of gross domestic product.

Bond yields from the US to Australia have plummeted to all-time lows as the pandemic forced central banks to launch trillions of dollars of unconventional monetary-policy programs to bolster economies.

Demand by investors for riskier assets has in turn pushed the yield on Bahrain’s $1 billion bond due 2030 this month to the lowest level since its pricing in May.

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