Qatar Raises $9 Billion in Middle East’s Biggest Bond Sale

Qatar Raises $9B in Bond Sale
  • Bonds offered across five-year, 10-year and 30-year maturities
  • Pricing ‘on the generous side,’ according to GMSA Investments

Qatar sold $9 billion of Eurobonds, marking the biggest-ever bond issue from the Middle East where governments are tapping international investors to fill budget holes left by declining oil and gas revenues.

The country borrowed across three maturities, selling $3.5 billion in five-year notes at 120 basis points over U.S. Treasuries, the same amount in 10-year bonds at 150 basis points over Treasuries and $2 billion of 30-year paper at a 210 basis-point spread, according to a person familiar with the transaction. The amount is almost double the $5 billion that bankers close to the deal said Qatar was targeting.

The deal follows a $5 billion Eurobond from Abu Dhabi last month with Middle Eastern sales this year now amounting to almost $30 billion if Qatar’s is included. Energy-exporting nations are borrowing internationally following a halving of oil prices since 2014 which has forced some governments to raid reserves. Qatar is also in the second year of a $200 billion infrastructure upgrade ahead of hosting the 2022 soccer World Cup.

“It’s quite surprising they printed so much,” said Angelo Rossetto, a trader at GMSA Investments Ltd. in London, who bid for the bonds. “Qatar printed nearly double expectations but left pricing on the generous side.”

Budget Gaps

Abu Dhabi’s sale included a tranche of five-year debt at a spread of 85 basis points last month. This is the first sale in four years from Qatar, the world’s largest exporter of liquefied natural gas. The nation’s budget deficit will widen to 5.2 percent of national output this year, according to the median forecast of eight analysts surveyed by Bloomberg.

“The Qataris refused to cut their spending, investing and consumption and spent more cash than they generated,” said Lutz Roehmeyer, who helps oversee about $12 billion as director of fund management at Landesbank Berlin Investment, and bought the five-year bonds. “First they touched their reserves, waited for a slightly higher oil price and issued that much to refill the reserves again. So it was pent up demand for cash.”

For an article on a glut of Middle Eastern bond issuance, click here.

Saudi Arabia, also planning a bond issue, will now “have to offer a very generous premium” to investors after Qatar has flooded the market, according to Sergey Dergachev, a senior money manager helping run $13 billion of emerging-market debt at Frankfurt-based Union Investment Privatfonds GmbH, who bought the bonds.

Moody’s Investors Service rates both Qatar and Abu Dhabi Aa2, the third-highest investment grade.

HSBC Holdings Plc, JPMorgan Chase & Co., Mitsubishi UFJ and QNB Capital LLC are acting as coordinators on the Qatar sale, said the person who isn’t authorized to speak publicly and asked not to be identified.

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