Bahrain to meet investors ahead of sovereign bond

August 29, 2014 - 12:00:00 am

DUBAI: Bahrain has chosen four banks to arrange investor meetings before a potential long-dated sovereign bond issue, said a document on Tuesday from lead managers for the kingdom’s first debt issue in over a year.

The kingdom hopes to benefit from historically low borrowing rates and high investor demand for Gulf bonds, which are expected to shake-off any negative impact from regional unrest in Iraq and Syria, to secure favourable terms for a deal of up to 30 years duration.

Bahrain has chosen Citigroup, Gulf International Bank, Mitsubishi UFJ and Standard Chartered to arrange the roadshows, which will begin on September 2, according to the document. A dollar-denominated bond of benchmark size — traditionally understood to mean upwards of $500m in total — could follow the roadshows, subject to market conditions. The document described the lifespan of the possible bond as ‘long-dated’ without elaborating further.

The kingdom last sold a sovereign bond in July 2013, when it completed a $1.5bn deal with a ten-year lifespan that attracted orders from investors worth more than five times the final amount.

Bahrain has been expected to come to the market for some time, and the choice of banks to arrange the deal had been rumoured in the market, albeit unconfirmed.

Unlike other states in the Gulf  region with cash reserves due to their hydrocarbon wealth, Bahrain runs a budget deficit and uses the bond market to fill the gap between income and expenditure. In 2013, the kingdom’s deficit nearly doubled to 410m dinars despite spending rising at its slowest rate since 2009.

Bahrain had been putting more cash into social programmes since being hit by unrest. Roadshows will held in Saudi Arabia and the UAE on September 2 and 3 respectively, while there will also be three days of meetings with investors in the US between September 3 and September 5. The schedule will conclude in London on September 8.