Kuwait’s $6bn bond issue this week was the perfect trade for the Gulf market before the issuance hiatus of late July and August begins. It showed fellow sovereigns in the Gulf that international investor demand is still strong.
The three, five and 10 year deal on Wednesday was the first from a top tier Middle Eastern sovereign credit since Abu Dhabi issued two days before the US and Israel attacked Iran.
Nearly five months later, a comparable name has at last come to the public market in big size.
The deal carried some new issue premium but nothing eyewatering — and it came in far from ideal conditions, since the US and Iran have begun attacking each other again, leading Iran to bomb Kuwait in the days up to execution.
The Saudi Public Investment Fund’s $7bn deal in May was a statement trade, announcing that the public market was open for large dollar deals from the Gulf.
But Saudi Arabia has been hit less hard than Kuwait. It has suffered little damage from Iranian missiles and drones and can export hydrocarbons via pipelines. Kuwait is wholly reliant on the Strait of Hormuz.
Bahrain's deal provided further comfort in June but that was a $1bn trade. At $6bn, Kuwait’s was in a different ballpark.
Kuwait was the first test of appetite in the public market by a GCC sovereign that has suffered Iranian strikes — even during execution — and that sought size.
Private placements like those done by Kuwait, Abu Dhabi and Qatar satisfy the issuer, arranger and the handful of investors which buy them, but they reveal nothing about the health of the primary market.
Kuwait was applauded by observers and rightly so. Its deal was just the medicine needed for the market as bankers and investors go into a few weeks’ respite before issuance restarts in September.