QATAR: Upsized issuance demonstrates confidence and could spur other regional borrowers

GULF COUNTRIES - In Brief 07 Apr 2020 by Justin Alexander

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It was no surprise that Qatar began marketing its bond issuance today. Interest in further borrowing had been signalled back in December when the state held a wide-ranging roadshow, despite its $12bn issuance a year ago (which confused markets because the country was running a fiscal surplus and didn't have that much to refinance, but with hindsight was a very good move for the state). There had been rumours in the market of an upcoming bond prior to the crisis and then again over the last few weeks, with reports last week that $5bn was being mooted (BB), but today Qatar doubled that with a $10bn offering split into 5,10 and 30 year tranches, mirroring the size and maturities of its 2018 and 2019 deals. The initial orderbook was already 2.5-times oversubscribed, a key metric that Gulf borrowers watch (BB, Rt). This is because bond issuance for Qatar is not just about raising financing to cover the immediate fiscal deficit, but also a way of demonstrating market confidence in the state's stability. The issuances in both 2018 and 2019 were both arguably more focused on demonstrating this confidence, in the context of the regional blockade, more than raising funds, although Qatar has a long track record of opportunistic financing and prior to 2016 was more comfortable than the other strongly rated sovereigns with debt financing. There had been some debate amongst analysts about whether or not Gulf states would draw more on their foreign assets over new borrowing this year. Whether this makes sense depends a lot on the liquidity and asset allocation of their wealth funds. Data is relatively limited on many of the fund holdings, but some are known to have a large strategic ...