Region records strong growth in debt issuance

14 August 2017

Consecutive interest rate hikes by the US Federal Reserve could potentially dampen appetite

The appetite for debt issuance in the GCC surged throughout the second quarter of 2017, according to UK-based consultancy PWC.

Saudi Arabia’s $9bn Islamic sukuk dominated the GCC region’s debt market between January and June 2017.

The Saudi sukuk, the first to be conducted in US dollar denomination, was structured into a $4.5bn five-year sukuk tranche at 100 basis points over the mid-swap rate and an equal-sized 10-year tranche at a spread of 140 basis points to the benchmark.

The Omani government also issued a $2bn, seven-year Islamic sukuk, which was structured at 235 basis points to the benchmark, during the second quarter of the year

Saudi Arabia’s Dar al-Arkan Sukuk Company issued a $500m sukuk, which received significant interest from international market participants. MEED understands the order book was close to SAR4bn ($1.05bn), equal to two times of the amount issued.

The Dubai branch of Beijing-based Industrial & Commercial Bank of China (ICBC) led the region’s corporate bond issuance. The firm listed three bonds on Nasdaq Dubai amounting to $400m, $300m and $500m.

In Saudi Arabia, Acwa Power Management issued an $814m bond, while National Bank of Kuwait issued non-guaranteed bonds worth $750m as part of its medium term bonds issue programme.

Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East region, however, warns that the consecutive interest rate hikes by the US Federal Reserve could hamper the strong appetite in GCC governments’ sovereign issuance.

A hawkish policy could also trigger a surge in borrowing cost across the global and regional debt market, the executive said.

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