Bahrain is entering the public debt market for the first time since 2021, capitalizing on a drop in borrowing costs and an increase in oil prices.
According to Reuters, the GCC’s smallest economy intends to sell dollar-denominated Islamic securities (sukuk) maturing in seven years with an indicative return of 6.87%, as well as traditional dollar bonds maturing in 12 years with an indicative return of 8%.
Read more: Will Sukuk issuances rise or fall in 2023?
The offering follows a reduction in the country’s credit risk, with S&P Global Ratings raising the outlook on Bahrain’s debt to positive in November on expectations that the government will continue efforts to reduce the country’s budget deficit and that high oil prices will benefit the country. The island Kingdom has a credit rating of B+, which is four levels below investment grade.
According to Dubai-based Arqaam Capital, Bahrain has around $2.5 billion in debt maturities this year, including a $1.5 billion bond maturing in August.
The yield on Bahrain’s bond due 2034 has fallen by about two percentage points since October to 7.2% as of 10:00 a.m. in London. The cost to insure the nation’s debt against default has also declined around 120 basis points since July to around 245, according to five-year credit-default swaps.
The Kingdom hired Bank ABC, Citigroup Inc., First Abu Dhabi Bank, HSBC Holdings Plc, JPMorgan Chase & Co., National Bank of Bahrain, and Standard Chartered Plc to arrange calls with bond investors on Wednesday.
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