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Bahrain has chosen four banks to arrange investor meetings before a potential long-dated sovereign bond issue, said a document 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 picked Mitsubishi UFJ. Gulf International Bank, Citigroup and Standard Chartered to arrange roadshows, which started this week.
A dollar-denominated bond of benchmark size – traditionally understood to mean upwards of $500 million 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 $1.5 billion deal with a 10-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. Unlike other states in the Gulf Arab region with significant 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 BD410 million ($1.1 billion) despite spending rising at its slowest rate since 2009. Bahrain had been putting more cash into social programmes since being hit by unrest in early 2011.
Roadshows are being held in Saudi Arabia and the United Arab Emirates today, while there will also be three days of meetings with investors in the US from today until Friday. The schedule will conclude in London on Monday.
