Wednesday 10, January 2018 by Jessica Combes

Expect a busy period of GCC issuance – BofAML


In the GCC, issuance will be the key theme in the near-term, particularly as issuers take advantage of low longer-dated US rates with Oman recently mandating banks for a triple-tranche deal.

span style="font-size: small;">BofAML forecast $8.5 billion gross issuance this year and whilst Qatar is also expected to issue, particularly given the $2 billion Eurobond maturity this month, an expected $10 billion this year. BofAML still sees value in Qatar (MW) vs. GCC peers, trading almost 60bp wide for its rating.

span style="font-size: small;">Elsewhere, BofAML is UW Kuwait and Abu Dhabi; although the balance sheets of both issuers are extremely strong (particularly given sovereign wealth assets), valuations are tight, with the search for yield likely to benefit higher-spread sovereigns. BofAML is UW Dubai given tight spreads relative to a high debt burden, with increased borrowing for projects particularly ahead of the 2020 Expo. BofAML  is MW Saudi Arabia; spreads are wide for the rating, flat to HY Russia in the front-end, but this is justified given very large issuance forecasts. BofAML expects $20 billion this year.

span style="font-size: small;">BofAML is MW Oman which the bank expects to downgrade to HY later this year, but feels this is priced in with spreads implying a single-B rating. Furthermore, the country will continue to issue large volumes in in the external market to fund the deficit. BofAML is OW Bahrain given exceptionally wide spreads for its rating and relative to Saudi Arabia; the country is expected to be financially supported by the GCC if it commits to reforms.


Features & Analyses