Middle East Bonds
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Islamic Development Bank is expected to raise $1.5bn with a five year sukuk on Wednesday. -
Trading of Saudi Aramco’s $12bn bond has slowed considerably since it was priced on Tuesday last week, but all five tranches have failed to rebound to reoffer, and the longer ones were 1.5 points down by Wednesday afternoon this week.
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The Islamic Development Bank has announced initial price thoughts for a five year sukuk dollar bond — its first since a euro benchmark in November 2018.
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First Abu Dhabi Bank has printed two sterling private placements in the last week — the most recent Tuesday morning’s £120m note through JP Morgan — adding to a flurry of sterling trades from the Middle East.
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Saudi Aramco might have expected a $12bn bond it issued on Tuesday to be hailed as a triumph, coming as it did well inside its sovereign curve after taking orders that at one point reached $100bn. But after pricing, the demand evaporated, the bonds fell below reoffer, and the notion that the European Market Abuse Regulation has ended the practice of order inflation was left in tatters.
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Saudi Aramco’s hotly anticipated $12bn bond was priced yesterday with the fanfare investors had expected. Demand for the deal was so large that the sovereign rallied 20bp as the deal printed, but stated final orderbooks of $92bn are being questioned as two investors say only the 30 year tranche is still bid above re-offer. The leads disagree, though, with one saying he saw all the tranches above their pricing levels.
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Saudi Aramco is making a splash with its bond market debut, gathering a staggering $85bn of orders for a six tranche deal expected to exceed $10bn.
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Indications of interest for Saudi Aramco’s planned bond issue were understood to have topped $15bn on Thursday morning in London, with three days left of the roadshow still to run. Contrary to press reports, investors have been told on the roadshow that the cash raised will not be used directly to fund the acquisition of Saudi Basic Industries Corp, as that is not expected to take place for another six to 12 months, writes Francesca Young.
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It is clear that Saudi Aramco does not need the cash from the bond it looks set to raise next week. With that being the case, investors and bankers should bet on the lower end of any stated size range, and other Saudi issuers should be hoping that tight pricing is the priority
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Indications of interest for Saudi Aramco’s bond are understood to have hit over $15bn, with the roadshow not finishing until Monday April 8.
