Public bonds would be better for Qatar National Bank
GlobalCapital, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
People and MarketsCommentGC View

Public bonds would be better for Qatar National Bank

Qatar National Bank (QNB) has picked up $2.38bn of bonds via private placements (PPs) in the last fortnight. But the size of the deals are such that they would have been better printed as public Eurobonds.

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 seven year amortising deal, which bounced two points. In 2015, that private placement made headlines when Standard Bank, the arranger, was fined for failure to prevent bribery. The charge related to a $6m payment by former sister company Stanbic Tanzania, which the UK’s Serious Fraud Office alleged was intended to induce members of the Tanzanian government to show favour to the $600m PP proposal.

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 benchmark sized demand floating around for your debt, why not drive the price lower, see if more investors want to participate and print in the public Eurobond market?  

A private placement for QNB is good, but a public bond would have been better.

Gift this article