Issuers from the GCC region have been taking advantage of this week’s calmer markets to raise funds through debt issuance. Yesterday, Qatar came to the market with a USD10bn bond issue. Today Abu Dhabi is also looking to issue bonds in a multi-tranche issue.
The Qatar deal consisted of 3 tranches of 5-year, 10 year and 30-year maturities with reports suggesting the order book received as much as USD45bn of orders. After tightening 35bps from initial guidance, which priced the issue more attractively than secondary issues, the deal finally priced at 300bps and 305bps over USTs for the 5-year and 10-year tranches respectively. The 30-year issue was priced at a yield of 4.4% versus initial guidance of 4.75%.
Qatar continues to screen attractively on our models: For example, an existing 10-year issue, Qatar 9.75% 2030, trades ~3.8 credit notches cheap with a yield of 3.7% which looks attractive for an Aa3/AA- (by Moody’s/S&P) issuer.
Qatar’s natural resource endowment and accompanying LNG exports have been important drivers behind the economy’s transformation over the past 20 years and are a key factor behind its accumulation of sizeable asset buffers, a major economic and credit strength. Qatar’s strong net external asset position has enabled it to weather the lower oil price environment post 2014 and the impact of any capital outflows during the 2017 Saudi Arabia-Qatar spat. We expect these asset buffers to make it resilient against the backdrop of the Covid-19 hit to global growth and weaker energy prices.
Last month, when S&P revised down its oil price forecasts and global growth estimates it affirmed Qatar’s rating at AA- with a stable outlook noting: “Despite increased external financing needs, we still regard Qatar's overall external position to be a key strength, underpinned by our estimate of its large liquid financial assets, equivalent to more than 100% of GDP. This provides the government with an exceptional buffer during financial shocks.”