Q3 kicked off with blushing faces in a timid atmosphere, rendering major bond players uncertain, writes Joey Geadah, Bonds Analyst at Zawya.
The third quarter witnessed minimal bond action in July, with nations such as Bahrain and Oman once again absent. Those who tried to break the monotony did so cursorily and failed to have much impact on the Middle East and North Africa bond panorama.
Kuwait
Capital Standards Rating Co. (CSR) gave a BBB+ bond rating for the up to KWD80 million proposed bond issuance of Kuwait Projects Company (Holding) 'KIPCO'. It would rank equally with any current or prospect unsecured issuances by the firm. The rating reflects KIPCO's strong ability to service its debt with convenient liquidity and a meticulous and active approach to managing its funding profile.
UAE
National Bank of Abu Dhabi's (NBAD) landmark issuance of the JPY10 billion Samurai bond with a 15-year tenor confirms NBAD's steady tactic in diversifying its funding sources and broadening its liability résumé. The debt instrument matures in 2026 with a fixed coupon rate of 2.6%. Mistubishi UFJ, Morgan Stanley Securities and HSBC Securities Japan acted as the joint lead managers.
Dubai Holding Commercial Operations Group repaid a CHF250 million Swiss bond that was due on July 14, showing full commitment vis-à-vis its debt obligations.
Market conditions coerced Abu Dhabi's Tourism Development Investment Company (TDIC) to explore proxy financing selections after holding over a planned bond sale until Q4, despite the fact that roadshows were already completed.
Qatar
Qatar's stock exchange bond trading platform may see light as early as the fourth quarter of this year. This step would amplify liquidity and intensify blossoming capital markets. This comes as banks in Qatar gear up for a gigantic lending extravaganza to help sponsor the country's upcoming USD100 billion infrastructure building program, knowing that it will host the 2022 World Cup. Moreover, measures are been introduced to make the market more contemporary, as Doha awaits a decision later in December from eminent assessor MSCI over whether it has been upgraded from a frontier to a promising market.
Lebanon
Menace could halt Lebanese banks should Syria's uprisings upset Beirut's political stability and economic life. Inflow of remittances by wealthy Lebanese expatriates could be withdrawn due to degeneration in the nation's political economy. Approximately 70% of the nation's debt which is rated B1 by Moody's (speculative grade) is held by local banks. In a worst-case scenario, should foreign investors depart the market, Lebanese bondholders, who own too much of the debt to allow the prices to fall, will assist in sustaining downward yields.
Aiming to refinance bonds, the Lebanese finance ministry has appointed Blom Bank and Citibank to manage a Eurobond issue worth USD950 million. Stimulated by rising transfers to the national electricity company and by a swell in the value of installments' settlements of the country's foreign debt, the country's budget deficit broadened by LBP530 billion, reaching LBP1.833 trillion in the first five months of 2011, compared to the same period a year ago.
Iraq
After being shattered by wars and sanctions, Iraq seems to be recuperating by trying to sell next year its first bond since 2006 via the central bank. Escalating oil revenues alongside relative stability are helping lower borrowing costs.
Saudi Arabia
Moody's assigned a Baa3 issuer rating to SABIC Innovative Plastics Holding; as a result, approximately USD3.6 billion of rated debt might be affected. Likewise, SIP's senior unsecured guaranteed notes were upgraded to Baa3 from Ba2 and the senior secured term loans of SIP and its subsidiaries to Baa2 from Baa3.
Egypt
In the aftermath of the revolution, Egypt depended vastly on short-maturity Treasury bills in an attempt to finance its mounting fiscal deficit. However, as investors have sought higher yields than the impecunious nation is able to pay, recent auctions unraveled the Ministry of Finance's inability to meet its sales objectives.
BNY Mellon from its position as fiscal agent, principal paying agent, transfer agent and registrar for The Arab Republic of Egypt announced that the USD1 billion 8.75% notes have reached their 10-year maturity on July 11, 2011. Principal and interest payment of the bonds have been fully coordinated by the state via the fiscal agent to Euroclear and Clearstream Luxembourg with respect to the Regulation S notes and to DTC with respect to the 144A notes.
For the first time since February's prominent revolt, Egypt's EGP3 billion two-year bond selling in an auction on the domestic market, may perhaps encourage foreign investors to buy shorter-term securities ahead of parliamentary elections in the fourth quarter.
As Q3 commenced, the MENA bond panorama shows wishful thinking in trying to expand into a wide and deep landscape. Should MENA debt activity and specifically the bond platform continue to be shy and reclusive, an anticipated pipeline of prospective deals will not be sufficient to ignite the bond's wick.
Related Story: MENA Bonds: Out Of Tune In June
Joey Geadah
Research Associate- Bonds
joeyg@zawya.com
© Zawya 2011
