GCC Bonds: Appetite remains strong
USD34bn GCC bonds issued last year; 2012 pipeline healthy
GCC entities issued USD34bn bonds in 2011, slightly down from 2010. Adnan Halawi, Zawya’s Fixed Income Analyst, attributes the decline to the effects of the Eurozone debt crisis, the Arab Spring and a shift to sukuk.
GCC BONDS REVIEW: 2011
2011 was a good year for the Gulf bonds market, but not the best on record. Data compiled by Zawya Bonds Monitor show an 11% decrease in total bonds issued in the GCC during 2011 to USD 34 billion from USD 38 billion in 2010. These figures include all corporate and sovereign bonds out of the GCC with tenors of one year and above.
The decline could be attributed to many factors including the Arab Spring – especially in Bahrain – the Eurozone debt crisis, and an increasing interest by issuers to sell debt using Shariah-compliant channels like sukuk. Yet, regional issuers benefited from international investors’ strong appetite for their debt and obtained high ratings from global rating agencies, achieved oversubscription, and announced new programs even if some were shelved to 2012.
The UAE continues to be the biggest issuer of bonds in the GCC with USD 16.5 billion issued in 2011, up from USD 12.9 billion in 2010. Qatar came in second with USD 9.7 billion followed by Kuwait with USD 6.4 billion.
Source: Bonds Monitor
GCC borrowers issued their bonds in 12 currencies worldwide, but the US dollar remained the currency of choice. USD-denominated bonds grabbed USD 14.4 billion, or 42%, of the total. Kuwait dinar (KWD) ranked second with USD 6.4 billion thanks to abundant treasury issuance by the Kuwaiti central bank.
The corporate sector issued only 21% of the total while the remaining was issued by sovereign and quasi-sovereign issuers. This comes as no surprise in a region where most issuers are government owned, backed or supported. This reason could also be behind the fact that the biggest chunk of the rated bonds issued during the year obtained the highest ratings from international rating agencies.
The London Stock Exchange (LSE) remained the favorite listing bourse for GCC issuers. The LSE seized 13 GCC bond listings with a combined total of USD 12.4 billion – or a hefty 36% of the total. Luxembourg stock exchange ranked second.
Bank of Tokyo Mitsubishi UFJ and HSBC took top ranking in the Zawya Bonds Monitor league tables for lead managers for the year 2011.
The sector breakdown comes in line with the economic and business nature of the GCC region. Proceeds from bonds issued in 2011 went to governmental institutions, financial services, oil and gas, power, transport and real estate sectors.
In terms of size, the biggest issuers were the Qatari government, UAE’s IPIC, Aabar and Emirates airline.
As much as 35% or USD 12 billion, of the total were issued in the form of treasury bonds while 60%, or USD 20.7 billion, were issued in the form of Eurobonds, Bonds Monitor data showed.
Click here to view our Bonds Yearly Review for the year 2011
GCC bonds timeline
What follows is a timeline of the major events and developments that took place in 2011 and shaped the bonds industry, some of which are expected to leave their impact and shape the year 2012 as well.
|Jan||Qatar Central Bank Issues QAR50 Bln Bonds, Sukuks||View|
|Feb||GIC successfully issues MYR 600 Million Medium Term Note in Malaysia||View|
|Mar||Abu Dhabi’s IPIC Sells Bonds Worth EUR2.5B, GBP550M||View|
|Apr||Mubadala Sets Final Pricing On Two-Part Dollar Benchmark Bond||View|
|May||Aabar Prices EUR1.25B Exchangeable Bond Over Daimler Shares; Demand High||View|
|Jun||Emirates Airline Prices $1B 5-Year Bond At 99.904, Swaps +3.3||View|
|Jul||NBAD Issues YPY10 billion Samurai Bond||View|
|Aug||Qatar National Bank To Set Up $7.5B Bond Program||View|
|Sep||NBAD issues 25 year private placement under its EMTN Programme||View|
|Oct||Standard Chartered brings international investors to meet issuers from the Middle East||View|
|Nov||Union National Bank’s $400m bond successful in tough market||View|
|GBSA publishes inaugural Standards for Gulf Debt Issuers||View|
|Qatar Sells $5 Billion 3-Tranche Bond Into Heavy Demand||View|
|Dec||Qatar’s Successful $5 Bln Bond Seen Heralding More Issuance||View|
|Taqa issues two bonds to raise $1.5b, repay debt||View|
|Markaz closes bond issuance||View|
|QNB Group and Qatar Development Bank – QDB announce the completion of the first treasury bills trade on the Qatar Exchange||View|
|GBSA publishes compendium of GCC local currency government markets||View|
Some of the trends and events that took place in 2011 in the GCC bonds market could be summarized as follows:
– Many issuers, including Dolphin Energy, Doha Bank and TDIC, chose to shelve their issuance plans due to unfavorable market conditions despite conducting roadshows.
– Many issuers – and some for the first time – chose to go for Islamic bonds as an alternative source of funding. These include HSBC Middle East, Taqa and Majid Al Futtaim Group.
– Qatar’s decision to list and trade bonds was perhaps the most important step toward deepening the regional bonds market.
– GBSA’s efforts will help increase transparency and consolidation.
– Kuwaiti issuers, including CFC, UASC and Markaz, returned to the market.
– Bahrain maintained a reasonable issuance pace despite the turmoil and an absence of corporate issuers.
– GCC bonds witnessed strong demand and oversubscription.
– A healthy pipeline aided by construction, expansion and refinancing needs, keeps us optimistic regarding 2012 with many programs announced and non-deal roadshows in 2011.
For more information, please contact the writer:
Team Leader – Fixed Income