Region set to see flurry of bond issues this year

Manama: Gulf region is set to witness a strong line-up of corporate debt issues in the second half of 2009, according to investment bankers close to these issues.

The bond issues will initially be dominated by government-owned entities followed by some of the top-layer corporate houses, they say.

"We are confident that the Gulf bond markets are set for a strong revival this year. Although there have been some good levels of issuance across the global emerging markets, the Gulf region has been slower to react to the positive market sentiment," said Mark Waters, Head of Capital and Debt Markets, Middle East, BNP Paribas.

"However, momentum is now picking up with two large sovereign issues having been recently concluded," Waters said.

Bahrain is set to issue about $750 million (Dh2.75 billion) in bonds in local currency and US dollars. Abu Dhabi and Qatar have already sold $6 billion worth of bonds between them in the past month but are expected to issue more and at longer maturities. Investment bankers say Kuwait and Dubai are set to join the bond band wagon in the near future.

Analysts believe the Gulf bond market is set to get a fresh lease of life with the recent government-led issues. There is about $110 billion of outstanding sovereign and corporate bonds in the Gulf, the majority issued by governments and financial institutions.

This accounts for only about a 10th of the region's gross domestic product, leaving huge potential for future issues for regional governments and corporates.

"Armed with top ratings most Gulf governments and government-owned entities are better positioned to issue bonds to secure financing for some of their development projects. In many cases the government issues are targeted at providing the much-needed benchmark yield that government companies can eventually use to improve pricing and kick-start the market that has been dormant for long," said Waters

There are reports that Dolphin Energy, a gas producer owned by Abu Dhabi, is planning to raise up to $1 billion through a bond issue. The company recently raised $2.6 billion through a syndication deal. According to banking industry sources Mubadala, the Abu Dhabi Government-owned investment fund, has a $5-billion bond in the pipeline that could come to the market this year. Moody's rates Mubadala, the Abu Dhabi National Energy Company (Taqa) and the Tourism Development and Investment Company (TDIC) at "AA2", the same level as Abu Dhabi's sovereign rating.

Bankers and analysts agree that a positive market response to the sale of government debt - and the generation of a benchmark yield curve - could prompt a flurry of corporate bond issuance.