London: The government of Qatar has launched a $5.5 billion (Dh20.2 billion) loan into general syndication, becoming the latest Gulf borrower to hit the market as countries, banks and corporates in the region seek to lock in cash before the year-end.
Qatar’s five-year loan offers all-in pricing of 90 basis points over Libor. The country had initially hoped to raise up to $10 billion with pricing of around 80 bps, but had to revise expectations against a backdrop of tightening liquidity and an upward trend in pricing in the region as the large number of Middle East deals began to saturate the market.
Bank of Tokyo-Mitsubishi UFJ, Mizuho, SMBC, Deutsche Bank, Barclays and Qatar National Bank are arranging the loan and as it now stands Qatar is expected to successfully conclude the deal by the end of December, bankers said, with any market uncertainty already factored into the smaller deal size.
The deal has been helped by the deep pockets and cheaper funding of Japanese banks, which make up half of the lead bank group.
“Banks have a large appetite to hold this paper,” one banker said. “Qatar is a premium credit: it has one of the highest GDP per capita levels in the world. Banks have large country limits for Qatar.”
By contrast, the growing list of Gulf entities looking to borrow money has made it more difficult for some to close loans before the year-end, bankers say. Transactions finding it tough going include the $1 billion deal for Oman that is in the market.
“Oman is fully underwritten but it is not going so well in syndication — it is not getting good support.”
Oman is looking for a five-year facility paying a margin of 110 bps over Libor, which is being coordinated by Citigroup, Natixis and Gulf International Bank. The deal is fully underwritten by the three leads and commitments from other banks are due in the next few days.
Bankers say Oman is a very different prospect to Qatar. Oman’s deal was not helped by the fact that it was downgraded by Standard and Poor’s to BBB+ on November 21, just after the offering was launched and, as a result, take-up so far has been sluggish.
“Oman is fully underwritten but it is not going so well in syndication — it is not getting good support,” a second banker said. “There are too many deals in the market and pricing is too tight — banks are starting to hold back.”
However, with commitments not yet due, bankers close to the deal say there is still time. “It is too early to pass judgement. The situation might change,” said a third banker.
Busy times
Joining Oman and Qatar are several Gulf-based banks and corporates looking to raise loans this side of Christmas as low oil prices continue to bite into the region’s profitability.
Deals include a $800 million facility for Commercial Bank of Qatar, a $500 million deal for Doha Bank, a deal of up to $400 million for Gulf International Bank, a whopping $6 billion loan for petrochemicals company Equate and a $5 billion loan for Emirates Global Aluminium.
While many of these transactions will get done, including those from CBQ and Equate, according to several bankers, there will also be losers in the line-up as banks have to make decisions about which relationship will yield them most profit.
Bankers remain uncertain about Doha Bank’s choice of deal structure, while others say that Gulf International Bank has left it too late to complete a transaction this year.
In the past, Gulf banks might have played a bigger role in arranging such loans, but they have become less able to lend freely as low oil prices have reduced fresh flows of oil money into deposits.
Last month, Oman started marketing its $1 billion sovereign loan, while Bahrain raised $1.5 billion in bonds.
Local lenders priced out of many of these deals have now shut up shop to any new commitments until the first quarter of 2016 and have been told internally that their minimum pricing guidance has also increased, the second banker said.
This could also be reflected in international banks’ appetite, he said: “It is getting near the end of the year, liquidity is tight and the oil situation is not getting any better. International banks will question these deals as much as local banks.
“There will not be a huge list of banks joining Qatar’s deal in general, and once it is done, banks will take a lesson from it and pricing will shift upwards.”
