ADVERTISEMENT

Bahrain Wakes Up to Bond Reality as Secondary Market Hit

Bahrain Wakes Up to Bond Reality as Secondary Market Takes a Hit

(Bloomberg) -- Bahrain reined in its bond-sale plans as investors sought higher yields amid a surge in issuance from the Gulf.

After indicating last week that the kingdom could sell as many as three different tenors in a mix of conventional and Islamic debt, it only offered a 7.5 year sukuk on Wednesday.

The kingdom raised $1 billion from the sale of Islamic bonds at 6.875 percent, compared with initial price guidance in the 7 percent area, people familiar with the matter said. The order book, including interest from the joint lead managers, was around $2 billion for the debt, the people said. Bahrain last borrowed $3 billion in its biggest-ever syndicated debt sale in September.

Bahrain’s yields had jumped since the roadshow details were shared with investors. Recent sales from the region have seen a drop off in bids as appetite for Gulf deals flagged amid tight pricing. Weak global markets are also adding to the jitters.

Bahrain Wakes Up to Bond Reality as Secondary Market Hit

Bahrain’s decision to not issue the longer-tenor conventional bonds is because “it seems investors’ feedback regarding pricing didn’t match up to what the issuer was willing to offer,” said Hakki Kalsen, a portfolio manager for emerging-market debt at Union Investment Privatfonds in Frankfurt.

The Gulf’s smallest economy and a close Saudi ally, Bahrain has been borrowing regularly from the international debt market. Investors, counting on the implicit support from its neighbors, have so far shown support for the kingdom despite sluggish economic conditions. Late last year, Bahrain was said to ask Gulf allies for financial assistance as it sought to replenish its foreign-exchange reserves and avert a currency devaluation.

Bahrain’s Ministry of Finance didn’t immediately respond to an email seeking comment.

BNP Paribas SA, Citigroup Inc., Gulf International Bank BSC, National Bank of Bahrain BSC and Standard Chartered Plc are arranging the bond sale.

To contact the reporter on this story: Archana Narayanan in Dubai at anarayanan16@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Alex Nicholson, Claudia Maedler, Vernon Wessels, Michael Gunn.

©2018 Bloomberg L.P.