Bahrain Said to Plan Third International Bond Sale This Yearby and
Gulf kingdom aiming to issue Eurobond later this year
Raised funds twice in 2016 through sukuk, bond retap
Bahrain plans a third sale of international notes this year as it sounds out bankers to pitch for arranger roles in a benchmark sale of Eurobonds, according to two people with knowledge of the deal.
The issuance from the government, which was downgraded to junk this year by all the major rating companies for the first time since 1999, may take place any time after August, the people said on condition of anonymity as the information is not public. Investors typically classify benchmark size as a deal of at least $500 million.
The tiny Gulf kingdom is struggling to shore up finances hit hard by sliding oil prices. That’s pushed the sovereign to tap both the domestic and international markets to fund its expenses. Bahrain sold $435 million of privately placed dollar sukuk in May. In February, it raised $600 million via five- and 10-year bond retaps.
The precipitous decline in finances -- despite support from Saudi Arabia -- has intensified Bahrain’s fiscal vulnerabilities and raised the country’s cost of capital. While the government has already increased water and electricity prices, lower projected oil prices in 2016 imply that the overall fiscal deficit will remain at more than 15 percent of gross domestic product, according to the International Monetary Fund in January.
A spokesman for Bahrain’s central bank didn’t immediately respond to calls or e-mails seeking comments on the forthcoming bond sale.
The yield on Bahrain’s bond due January 2021 dropped 42 basis points, or 0.42 percentage points, this year to 4.95 percent at 3:55 p.m. local time on Monday. That compares with an average decline of 65 basis points for Middle East bond yields through Friday, according to JPMorgan Chase & Co. indexes.