Kuwait Targets $8 Billion in Debut International Bond Offer

  • Country plans to raise funds by selling 5-, 10-year debt
  • Gulf nation expects $32 billion budget deficit this year

Kuwait is poised to sell $8 billion in its debut international bond offering, making it the latest in a string of Middle Eastern governments resorting to foreign investors to help bridge budget deficits left by oil markets halving since 2014.

The country is offering $3.5 billion in five-year notes at 75 basis points over similar-maturity U.S. Treasuries and $4.5 billion in 10-year bonds at a 100 basis-point premium, according to a person familiar with the offering who isn’t authorized to speak publicly and asked not to be named. The offer generated $29 billion in bids, the person said, allowing the seller to tighten pricing from initial guidance of about 100 basis points and 120 basis points respectively.

The government said in July it may sell as much as $10 billion in global debt markets as the country expects to post a budget deficit of 9.7 billion dinars ($32 billion) this year, deputy Prime Minister Anas Al Saleh said. By completing a deal now, Kuwait also avoids any possible hike in international borrowing costs if the Federal Reserve raises interest rates when it meets this week.

“It has a very low spread but the diversification effect is good,” said Lutz Roehmeyer, the director of fund management at Landesbank Berlin Investment GmbH, who bid for the bond. The "huge issue size" adds to the bond’s appeal to investors by making it more liquid and easier to trade after the issue prices, Roehmeyer said.

Qatari Sale

Kuwait, OPEC’s fifth-largest producer, is rated AA at S&P Global Ratings, the third-highest investment grade.

The deal is the third-largest from the Gulf region, following Saudi Arabia’s record $17.5 billion and Qatar’s $9 billion sales last year. Gulf governments raised more than $48 billion in bond sales last year -- the most since at least 2007. Oman, the largest Arab oil producer that isn’t a member of OPEC, raised $5 billion from a three part bond sale earlier this month that included five-, 10- and 30-year maturities.

Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Deutsche Bank AG, NBK Capital and Standard Chartered Plc are managing Kuwait’s bond sale.

    Before it's here, it's on the Bloomberg Terminal.