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12| pfi | Middle East Report 2010 Bonds


levels of the past few years. The recent rally in spreads demonstrates the continued appetite for paper from the region and we anticipate that investors will look for new issuance from a range of borrowers to include sov- ereigns, SOEs and corporates,” said Spencer Maclean, a syndicate official at Standard Chartered, who expects issuance to pick up before 2011.


“The window of opportunity is now wide open. We expect a number of repeat borrowers and debut names to access markets before Eid al-Adha in mid-November,” agreed Whichello.


In conclusion, Whichello noted that there was a wall of cash out there and fund flows into real money accounts were at record highs, much of which would be put to work in new issues over the next three months. “The technicals are extremely supportive for our issuer clients,” he said. The Middle Eastern capital of all things glitzy and glamorous – Dubai – returned to the bond market on Sep- tember 29 in grand style, sending a strong signal about the turnround in investor perception. It paid no charge for its curve extension, tapping red hot demand at the per- fect time.


As the unrated city-state of Dubai continues to stun the world with its architectural and touristic masterpieces, the Emirate of less than 2m people amazed the market by paying next no new issue premium on its dual-tranche US$1.25bn Eurobond, in spite of its pariah status less than a year ago.


Dubai priced a US$500m 6.70% five-year issue at par for a spread of 542.7bp over US Treasuries and a US$750m 7.75% 10-year Reg S at par corresponding to 527bp over, through leads Deutsche Bank, HSBC and Standard Char- tered Bank. Both 2015s and 2020s traded at 100.00–100.25 in the secondary market. The Emirate’s first bonds after the Dubai World crisis came inside guidance of the 6.75% area for the five-year and 7.875% area for the 2020s, which in turn was well inside whispers in the region of 6.875% and 8%. Based on an adjusted curve, Dubai paid a maximum 5bp of new issue premium on the 2015s and up to 2bp on the longer tranche, given that, for example, another regional sov- ereign Abu Dhabi pays a pick-up of about 50bp between its 2014s and 2019s and Qatar pays about 30bp. The Emirate’s Eurobonds garnered a US$5bn order book from high-quality investors, sending a bold state- ment that Dubai is back in demand. Another repeat issuer was Qatar Telecom , which on October 6 topped its 2009 success with a two-part Reg S/144a bond issue that was 10 times covered, with orders totalling a staggering US$15.1bn versus last year’s US$13.5bn. Both tranches came well inside outstanding paper. The A2/A/A+ rated Qtel priced a US$500m 3.375% six-year deal at 99.243 to yield 3.516%, or 235bp over US Treasuries. The US$1bn 4.75% long 10-year came at 99.161, yielding 4.855%, or plus 245bp.


AMOUNT OF ISSUANCE


Amount (US$m)


2,000 4,000 6,000 8,000 10,000 12,000 14,000


0


The window of


opportunity is now wide open.


Joint leads Barclays Capital, Deutsche Bank, Mitsubishi UFJ, Qatar National Bank, RBS and Standard Chartered Bank brought the shorter tranche in line with guidance, or 15bp tighter than whispers, while the 2021s came at the tight end of 245bp–250bp guidance following a plus 262.5bp whisper. The 2016s traded at 99.875–100.125, or 228bp wide of Treasuries, on the break and the 2021s were seen at 100.625–100.875, or 237bp over. The 2016s come 15bp inside the outstanding Qtel 6.5% 2014s on an adjusted curve, although some investors called it more like flat, having taken off a bit of fair value spread given the high 112-plus cash price on the existing 2014s.


The dollar price on the existing Qtel 7.875% 2019s was also very high, at over 121, but even by taking a full 20bp off for that premium, the Treasuries plus 245bp pricing level on the new deal was well inside the outstanding. Being the only telecoms issuer from the region also helped the deal to fly off the shelf. Interestingly, the credit metrics actually put the com-


pany at Triple B, but the fact that it has 68% direct and indi- rect ownership by the Qatari Government (Aa2/AA) boosts the ratings as per Moody’s and S&P’s govern- ment rating methodology.


“If you believe the government ownership angle, and most people seemed to, then this pricing level was attractive for the rating,” said a banker away from the deal in New York.


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Q3 2010 Q3 2009


United Arab Emirates Qatar


Bahrain Kuwait


Saudi Arabia Lebanon Israel


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