May 7 (Bloomberg) -- Bahrain’s sale of $500 million in sovereign Islamic bonds is receiving “strong” interest from investors who have been starved of new issues amid the global credit crisis, Central Bank Governor Rasheed al-Maraj said.

“From the indication we have so far there is strong demand, especially because in the last few months there hasn’t been many new issues in the sukuk market,” al-Maraj said in an interview on the sidelines of the Islamic Financial Services Board summit in Singapore today.

Bahrain hired Calyon, Deutsche Bank AG and HSBC Holdings Plc to help it sell five-year sukuk, as Islamic bonds are known, the central bank said yesterday.

Islamic bond sales fell 21 percent to $3.4 billion this year after plunging 55 percent last year as the global credit crunch sapped investor appetite for all but the safest debt and an oil price slump eroded Middle Eastern wealth. Bahrain’s global sovereign sukuk will be the second of 2009 after Indonesia raised $650 million in April from its first sale of the securities.

Sukuk sales may rise to a record this year, led by issuers from the Persian Gulf, as higher yields attract investors, Saudi Arabia-based NCB Capital said in March.

Bahrain is borrowing to help plug a budget deficit the government predicts will swell to $1.8 billion this year as economic growth slows and oil export revenues wane. Bahrain’s economy, the smallest of six states in the Gulf Cooperation Council, is likely to expand 3 percent this year compared with growth of between 6 percent and 7 percent last year, according to al-Maraj.

Dinar Notes

The bonds may be sold by the first week of June, al-Maraj said today. Bahrain will also issue three-year notes in local currency to raise a further 250 million dinars ($663 million), he said, without providing a specific sale date.

Bahrain’s foreign-currency debt is rated Aa3 by Moody’s Investors Service and A at Standard & Poor’s, the sixth highest investment grade rating.

Indonesia’s first sukuk sale drew orders for $4.7 billion, seven times the securities on offer, Rahmat Waluyanto, director general of the debt management office, said last month. Middle East investors bought 30 percent of the bonds.

Sukuk are typically asset-based securities and pay a profit rate to investors instead of interest, which is banned by Muslim Shariah law.

To contact the reporters on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net

Last Updated: May 7, 2009 02:54 EDT