There's one notable absence from the government bond sale bonanza in the Middle East. Saudi Arabia and Abu Dhabi have propelled 2017's offerings in the region past last year's total of $79 billion. But of Qatar, nary a mention.
The country, which raised $9 billion from investors in May 2016, would seem an obvious borrower -- were it not for the tensions with its Gulf neighbours, and its protestations that it doesn't need the money.
Discount the latter argument. For all its hydrocarbon riches, Qatar has an expensive spending habit. Funding the growing budget deficit from asset sales won't quite plug the gap that a bond offering could fill -- especially with $10 billion of redemptions looming over the next two years.
With a credit market this hot it wouldn't be too much of a stretch for an AA-rated borrower like Qatar to be able to cover those liabilities. The recent rebound in liquefied natural gas prices also gives Qatar time to pick its opportunity. But the autumn is a fine time to bring major bond deals.
And it isn't as if the cost of issuance is a particularly tough hurdle. Qatar's credit spreads have returned to levels seen before its crisis blew up in June.
For Qatar, the problem is that a third of the investors that bought its last bond are based in countries in the Gulf Cooperation Council. They will struggle to justify holding a sanctioned country's debt.
Nevertheless, money managers from overseas flocked to the 2016 deal, and their appetite for Qatari debt is unlikely to have vanished. Any large-scale Qatari deal would be likely to enter the major bond indexes that fund managers are measured against, encouraging investors to buy them. That, combined with a juicy new issue premium, ought to solve the demand question.
The question is more about which international bank with debt capital markets expertise would be brave enough to incur the wrath of the Gulf countries blockading Qatar? At present not even cash money transfers can be made between Qatar and the rest of the Gulf states.
Banks face a trade-off between the opportunity of getting a lot of Qatar’s business by virtue of being the first mover. Against that is the risk of fees from the rest of the GCC withering -- in particular any fees from the Saudi Aramco IPO, set to be the largest ever with fees to match.
It is a dilemma few banks will want to address, but if Qatar were to approach banks directly with a request for pricing, it is one they would have to answer. If they don't, expect rivals from Asia to step in. It is striking that Qatar National Bank was able to raise $630 million last month from Taiwanese investors.
Despite its protestations, Qatar could do with the money. Its neighbors will find it increasingly hard to prevent it from raising foreign capital.
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