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Bahrain Collects $2Bn For First Dollar Bond Issue Since Gulf Aid

Bahrain Collects $2Bn For First Dollar Bond Issue Since Gulf Aid

Thursday, 26 September, 2019 - 11:30
Bahrain's Central Bank. (Reuters file photo)

Bahrain raised two billion dollars with its first issue of US dollar bonds since it obtained a $10 billion aid from its Gulf allies in 2018 to avert a credit crunch.

The Gulf state sold one billion dollars of sukuk, or Islamic bonds, due in 2027 with a yield of 4.5 percent as well as one billion dollars of conventional notes maturing in 2031 offering 5.625 percent, a document issued by one of the banks leading the deal showed on Wednesday, Reuters reported.

BNP Paribas, Citi, Gulf International Bank, JPMorgan, National Bank of Bahrain and Standard Chartered were hired to arrange the issue.

The Bahraini government received pledges of $10 billion last year from Saudi Arabia, Kuwait and the United Arab Emirates after low oil prices pushed its public debt to almost 93 percent of gross domestic product.

That came after it had to cancel a planned sale of international conventional bonds as investors demanded higher yields due to concerns about Bahrain’s debt sustainability.

Since the aid, its existing bonds have jumped back, as investors know Bahrain can count on support from its wealthier allies while it seeks to repair its debt-ridden finances, even though it has a junk credit rating.

Strong demand for high-yielding securities in a global low interest rate environment meant Bahrain was able to get lower yields for its bond issues than expected.

The sukuk was initially marketed with a yield of 4.875-5 percent and the conventional notes were put at 5.875-six percent.

Bahrain is aiming to balance its budget by 2023, a target it set for itself as part of last year’s bailout when it embarked on a series of reforms including further cuts in subsidies and the introduction of a five percent value-added tax.

Out of the $10 billion aid promised by Gulf allies, Bahrain received $2.3 billion last year and is expecting another $2.28 billion in 2019, the government said in May.

The Gulf state is set to receive further payments of $1.76 billion in 2020, $1.85 billion in 2021, $1.42 billion in 2022 and $650 million in 2023.

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