Bahrain was set to raise $2 billion on Thursday from a sale of bonds that included an Islamic tranche, after drawing demand of over $8.8 billion for its first public issuance since November 2021, a bank document showed on Thursday.
The heavily indebted small Gulf country launched $1 billion in sukuk maturing in more than seven years at 6.25% and $1 billion in conventional bonds due in 12 years at 7.75%, the document from one of the arranging banks said.
In a research note, Mashreq said it saw fair value at around 6.4%-6.5% for the sukuk and around 7.75%-7.85% for the bonds. "Bahrain needed to issue in the public market in 2023 after doing only small privates (private placements) in 2022. This was a good time," said Abdul Kadir Hussain, head of fixed income asset management at Dubai-based Arqaam Capital.
In a draft budget submitted to parliament this week, Bahrain projected budget deficits of 494 million dinars ($1.31 billion) in 2023 and 76 million dinars in 2024, according to local media. Bahrain said in October 2021 it was targeting a balanced budget by 2024, delayed by two years due to the COVID-19 pandemic.
The 2023 and 2024 forecast deficits are equivalent to 3% and 0.4% of gross domestic product, respectively, said Justin Alexander, director of Khalij Economics and Gulf analyst for GlobalSource Partners.
"The reason for the wider deficit in 2023 is a projected -21% decline in oil revenues compared with 2022, which seems to assume oil at $80 vs $100 last year with flat production," Alexander said. "This is probably about right."
Bank ABC, Citi, First Abu Dhabi Bank, HSBC, JPMorgan,
National Bank of Bahrain and Standard Chartered were joint lead
managers on the debt sale.
($1 = 0.3770 Bahraini dinars)
(Reporting by Yousef Saba;
Editing by David Goodman and John Stonestreet)
