Middle East debt boom continues

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Updates from Abu Dhabi

Bahrain-owned 100% oil and gas company BSC has sold $ 1 billion in bonds as an unprecedented rush continues in the Middle East region’s capital markets.

The bond had a yield of 7.5% and included a special clause that allowed investors to get their money back at par if the government “ceases to own 100% of the issuer.”

The deal came as Abu Dhabi Crude Oil Pipeline LLC mandated the banks to hold investor meetings for a possible bond. The issuer is indirectly 100% owned by ADNOC, Abu Dhabi’s state-owned oil company and one of the world’s largest oil producers.

A two-part bond, comprising a $ 800 million 12-year tranche and a $ 2.2 billion 30-year amortizable tranche is expected to follow, subject to market conditions, with an expected double A rating.

The deals are a sign that a recent wave of government bond borrowing has expanded to include more state-owned entities in the Middle East. Sovereigns and local authorities have sold nearly $ 60 billion in bonds this year, according to Dealogic data, making 2017 by far the most active year on record for the region.

Abu Dhabi and Saudi Arabia, which in September issued the world’s largest emerging markets bond so far this year at $ 12.5 billion, also sold multi-maturity dollar debt settlement , including 30-year increments.

The emissions rush came as low crude oil prices in recent years have put fiscal pressure on Middle Eastern countries and encouraged them to diversify their economies.

The recent strength in the oil price has helped issuers exploit the market without removing the incentive to diversify, analysts suggest, while issuers have also benefited from strong global demand for higher yielding securities.

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