GCC states diversify their funding options

11 September 2014

Bahrain and Sharjah look for new investors

Governments in the Gulf are setting new benchmarks for sovereign-level borrowing in the region as they use a wider range of financing instruments and secure longer-term funding.

Bahrain is set to raise a 30-year US dollar bond, the first time the Gulf state has raised a bond with such a long tenor. The country has previously only raised bonds of up to 10 years in length.

Manama has been keen to diversify its funding to tap different investors.

A 30-year tenor is likely to attract new institutional investors, such as pension funds and insurance companies, which have long-term liabilities on their books.

Other Gulf states have lengthened the tenors of their bonds with the Dubai government listing its 15-year $750m sukuk (Islamic bond) at the end of the April. The issuance was the first 15-year sukuk to be issued globally.

Raising money using a sukuk is another key trend among GCC sovereigns.

Sukuk help the region’s governments tap into the increasingly liquid Islamic banking market.

Sharjah has just set new benchmarks in both the length and type of its latest fundraising exercise. The emirate announced its debut $750m, 10-year sukuk on 10 September, marking the government’s first Islamic bond, as well as the first time a government has decided to raise 10-year money with its debut issuance.  

Other governments are planning to diversify their funding, with Oman likely to raise its debut sukuk in early 2015 and the emirate of Ras al-Khaimah is said to be considering a return to the Islamic bond market later this year.

They will be closely watching their neighbours’ efforts to raise long-term money from new sources as they formulate their fund-raising plans.

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