Bahrain’s United Gulf Bank (UGB) plans to start selling a bond issue of $200-300m on 11 February, according to bankers close to the deal.

The opening of order books to investors comes as Saudi real estate firm Dar al-Arkan completes its own bond issue. Bankers say the final terms of this deal will result in the firm issuing a $500m five-year bond, priced at 11 per cent.

The UGB issue is expected to be priced slightly lower, at about 10 per cent, although the price will rise by 1.25 per cent if the bank’s current BB- rating from Standard & Poor’s is downgraded.

There will also be a “put option” if Kuwait Projects Company, which now holds a majority stake in UGB, lowers its shareholding in the bank to below 51 per cent. This will enable bondholders to sell the bonds back to UGB at a predetermined price.

UGB and Dar al-Arkan are rated below investment grade.

The planned bond issues are a sign of activity returning to the Gulf bond markets after Dubai World announced it was seeking a standstill agreement on debts of about $22bn in late November, which brought the issue of new bonds to a halt.

Qatar Islamic Bank is also planning an Islamic bond (sukuk) issue, and has appointed the UK’s HSBC, Credit Suisse and Qatar’s QInvest to lead the issue.

“The completion of the issues from Dar al-Arkan and UGB will show how much investor appetite there is for Middle East issues that are below investment grade, so will give a good indication of what pricing levels are for other issuers. That should help other companies thinking of coming out with their own bond deals,” says one bond trader in the UAE.