QNB printed first a $1bn bond, then a $1.38bn deal, both via Bank of America Merrill Lynch. The first $1bn note was sold on January 31 to a single investor and it is unclear whether the second $1.38bn note printed two days later was sold to one investor or more.
Bankers say the deals came about via reverse enquiry, but that is no reason for the deals to be done in the PP market. Reverse enquiries are often spun into public notes. There is ample demand for QNB bonds from the broader market, so why not offer the paper to the rest of the market and print a public bond?
PPs have the advantage of being quick and easy. But public bonds often come with better pricing, as well as a useful side order of transparency and price discovery — something all emerging market issuers could do with more of. QNB demonstrating its market access is not to be sniffed at after last year's political wrangling.
Big emerging market PPs have a murky history, and often include a cost to the issuer.
When Angola printed its $1bn PP in 2012, the bond was up five points in the first few days of trading.
Tanzania followed in March 2013 with a $600m
Then Ematum, a government agency of Mozambique, sold a $500m PP in October 2013 via BNP Paribas and Credit Suisse, which it tapped a month later for another $350m through VTB Capital. That Ematum bond was part of an arduous exchange in 2016.
This is not to say that all emerging market PPs are bad, or indeed that the PP market itself is rotten.
But in the emerging markets especially, best practice should be to use that market as it is intended — for the placement of small, individual bonds and the sating of small pockets of demand, which combined, form a good funding source for an issuer.
If there is a
A private placement for QNB is good, but a public bond would have been better.