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Fri 13 Nov 2009 09:37 AM

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Strong appetite for Gulf bonds seen in 2010 - bankers

More than $20bn raised since Apr; bankers see $25bn-plus bond issues in 2010.

Bond issues in the petro-economies of the Gulf Arab region will increase in volume as well as size in 2010, as returns bolster international appetite for the region's debt, bankers say.

State and corporate issuers in the world's largest oil exporting region have raised more than $20 billion since April and enjoyed a strong take-up from international investors.

"Debt issuance in both debt capital market and project finance has picked up a lot and it is not over yet," said the regional head of structured finance at an international bank based in the region.

"Next year, if there is no hit before year-end, we are clearly on the path to recovery. So for the moment, one would clearly say substantially above $25 billion."

Highly-rated sovereign and government-linked entities have dominated the market, but prospects for corporate issues as well as increased demand for longer-term project financing are good, bankers say,

Earlier this week, Qatar's
Commercial Bank

issued a two-tranche $1.6 billion offering, one of the largest by a non-government owned entity in the region.

 

"There was overwhelming demand with investors demanding around $6.5 billion worth of paper of both tranches," said Klaus Froelich at Morgan Stanley.

Demand was "particularly strong from Europe and the U.S. but also very strong demand from Asia and the Middle East," he said.

Froelich, who heads up Global Capital Markets at Morgan Stanley in the Middle East, the lead arrangers for the bonds, said another $5-10 billion in issuance can be expected before the end of the year.

"Old deals are being revived, but new deals are also coming to the market. There has already been around $25 billion worth in the Middle East this year, and we could see another 5-10 billion before year end," he said.

Last month, Dubai launched a $6.5 billion bond plan consisting of $4 billion euro in medium term notes and a $2.5 billion Islamic bond, or sukuk.

Investor confidence is hinging on the repayment of Nakheel's $3.5 billion bond, maturing on Dec. 14, bankers say, but successful completion should see investors piling in cash to the region.

"It takes time for the market to come back," says a Dubai-based banker.

"We're getting there, and once the Nakheel issue is over, we'll see considerable "normal" corporate issuance, from issuers with lesser government ownership. There is appetite for non-government- owned entities and there are many good credits around". (Reuters)

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