$750m Bahrain bond 'to spur confidence'
Manama, November 21, 2011
Bahrain's $750 million Islamic bond issue last week was a part of the Kingdom's plan to create a yield curve, said a senior Central Bank of Bahrain (CBB) official.
'Bahrain's return to the sukuk market through a longer dated issue is a part of our desire to create a yield curve in the international sukuk market in the same way that we have in our domestic market,' said Shaikh Salman bin Isa Al Khalifa, executive director of banking operations at CBB.
The kingdom, hit by political upheaval earlier this year, drew $1.8 billion in demand for its seven-year bond, or sukuk, its first sovereign issue since March 2010, pricing it at a yield of 6.273 per cent on Wednesday.
'The strong demand from new and existing international investors is a confirmation of investor confidence in our credit, particularly in view of the volatile market backdrop,' Shaikh Salman said.
The issue was its first seven-year international sukuk offering and the order book was allocated 62 per cent to Middle East investors, 20 per cent to Europeans and 12 per cent to Asians, the bank said.
Investor meetings ended in Saudi Arabia, Kuala Lumpur, London and Singapore last week and BNP Paribas, Citi and Standard Chartered were arranging the deal.
The CBB said certificates will be issued by the CBB International Sukuk Company and are expected to settle tomorrow. They will be listed on the London Stock Exchange.
Bahrain had looked to sell a $1 billion conventional bond at the beginning of the year but was forced to postpone plans because of the unrest.
Analysts said the issue may help Bahrain reduce its budget gap, set at 10.1 per cent of GDP, or BD835.7 million ($2.23 billion) this year. For 2012, the government forecasts a deficit of 8.8 per cent due to slightly lower spending, which at BD3.08 billion is 14 per cent higher than the original plan.
Analysts have forecast that Bahrain needed an average oil price of $108 to balance its budget and that it will see a fiscal deficit of 1.1 per cent of GDP in 2011.-TradeArabia News Service