Bahrain offers dollar bond, sukuk to plug growing budget gap

Manama: Bahrain started marketing a three-tranche dollar bond to help plug its budget deficit.

The Gulf nation is selling benchmark-size seven-year Islamic bonds as well as conventional debt with a duration of 12 years and/or 30 years, according to a person familiar with the matter, who’s not authorised to speak publicly and asked not to be identified. Benchmark typically means the equivalent of at least $500 million.

Bank ABC, Citigroup Inc, Gulf International Bank BSC, HSBC Holdings Plc, National Bank of Bahrain BSC and Standard Chartered Plc are the lead managers for the sale and will arrange a global investor call.

The announcement marks the kingdom’s return to the international debt market for the first time since May.

In May, Bahrain sold $2 billion in 10-year notes and 4.5-year Islamic securities, becoming the lowest-rated country to sell dollar bonds since the market hiatus triggered by the Covid-19 pandemic.

Bahrain is under fiscal strain despite a $10 billion bailout package pledged by its neighbours in 2018. The Gulf Cooperation Council member is on course to rack up a deficit that the International Monetary Fund projects will be among the world’s 10 biggest this year at 15.7% of gross domestic product.

Bond yields from the US to Australia have plummeted to all-time lows as the pandemic forced central banks to launch trillions of dollars of unconventional monetary-policy programs to bolster economies. Demand by investors for riskier assets has in turn pushed the yield on Bahrain’s $1 billion bond due 2030 this month to the lowest level since its pricing in May.