Qatar’s state-owned petroleum company, Qatar Petroleum (QP) recently raised $12.5 billion in bonds offering, which was oversubscribed more than three times and it shows an “extremely strong” appetite for investment-grade bonds from the Gulf sovereigns, or its related enterprises, according to Kamco Invest.
According to the Kuwait-based asset management company’s latest report, “The recent announcement of $12.5 billion in bonds from QP that received orders of $41 billion shows that investor appetite for investment-grade bonds from the GCC (Gulf Co-operation Council) governments, or GREs (government-related entities) remain extremely strong.”
Earlier this month, QP had raised $12.5 billion in a multi-tranche bond offering, marking a significant achievement for an oil and gas company in the international financial and capital markets. It is the largest US dollar fixed-rate oil and gas offering and also the largest corporate issuance in the Middle East and North Africa (MENA) region.
A meeting with international investors late last month had led to “significant” interest from insurers, asset managers, pension funds and bank treasuries, which resulted in a “high-quality order book” with demand peaking above $40 billion from as many as 500 investors, QP had said.
Despite, Qatar’s decline in the bonds and sukuk issuances in the first half (H1) of this year, following two consecutive years of fall in full-year issuances in 2019 and 2020, its fiscal deficits were relatively smaller than other GCC peers, Kamco said.
As per Kamco, in the broader GCC region with H1-2021 issuance of $80 billion and an additional $22.3 billion in refinancing requirements in the second half, total issuances are expected to exceed the $100 billion mark for the year. The expectations of a faster recovery during H2-2021 are projected to result in additional issuance, mainly from corporates.
In spite of the growth in corporate issuance, Kamco expects to see a year-on-year decline in government issuances in the GCC in 2021, and as a result, full-year issuances are expected to fall short of last year’s levels.
The reason for the slowdown in the issuances in the GCC region, mainly the government, as oil prices continue to remain elevated at almost three-year high levels of more than $75 a barrel mark, the report said.
“This would significantly reduce the government’s infrastructure funding shortfall, thereby providing a much-needed breather to the increasing debt-to-GDP (gross domestic product) ratio for the bulk of the GCC countries,” it added.
The funding requirements related to the pandemic were broadly met by reforms and other measures like loan moratoriums, relaxations of government duties and tapping of sovereign wealth funds against direct debt issuances as seen in some of the developed countries.
According to the International Monetary Fund (IMF), the fiscal deficit for the GCC countries is expected to decline from 9.2 percent of GDP to 3 percent in 2021 and further down to 1.4 percent in 2022.
Highlighting that these estimates were made at a time when oil prices were just over the $60 mark, Kamco said with prices now “significantly” higher and consensus expectations of $67 in the third quarter of 2021, followed by $70 for the subsequent quarter, higher oil revenues are expected to further lower deficits.