Investor orders for $4bn Qatar’s sukuk exceed $24 billion
DUBAI QATAR launched a $4-billion, dual-tranche sukuk on Wednesday, its first Islamic bond issue in nearly a decade and the largest sukuk deal from the Gulf this year.
The world’s top liquefied natural gas exporter took full advantage of heavy global interest in high-grade Gulf debt and strong demand for sukuk among the region’s cashrich Islamic investment funds.
The five- and 10-year tranches will each be $2 billion in size. Final profit guidance for the long five-year portion, maturing in 2018, is at a spread of 115 basis points over midswaps, and for the long 10-year tranche maturing in 2023 at 155 basis points over midswaps, market sources said.
These terms are tighter than revised guidance released on Tuesday, thanks to investor orders totalling in excess of $24 billion, the sources said.
“Qatari banks will likely put in large orders; some will put surplus deposits to work while others will likely leverage up given the zerorisk status of the issuer,” said Akber Khan, director for asset management at Al Rayan Investment in Doha.
“The Qatari sovereign has a history of being a savvy issuer and appears to be taking advantage of the extraordinary spread compression we’ve seen in GCC (Gulf Cooperation Council) sukuk over the last 6 months.” Qatar normally doesn’t issue debt in small amounts: it printed a $5 billion, multi-tranche conventional bond last November, and before that a $7 billion bond in 2009. It had not issued a sovereign sukuk since 2003, when it priced $700 million of seven-year paper.
The Islamic debt market has been resilient during the latest phase of the eurozone crisis and most regional deals so far this year have been in the form of sukuk.
Unrated Dubai issued a two-tranche $1.25 billion sukuk in April, following Saudi Electricity Co’s $1.75 billion issue.
The issue size of Qatar’s sukuk, which will be structured under an ijara or lease format, was the maximum available based on the assets secured to back it, which are believed to be state-owned buildings and land. Final pricing is due later on Wednesday.
HSBC, Standard Chartered, Deutsche Bank and local Qatari lenders Barwa Bank and QInvest are bookrunners on the transaction.