By Abhinav Ramnarayan, IFR
Qatar Islamic Bank is set to raise US$1.5bn in a sukuk issue, and could be the first of many financial institutions to tap this capital market this year. The move follows a jumbo Islamic offering from Qatar last month to raise US$4bn – the biggest ever international sukuk transaction.
“I am not surprised at QIB,” said one origination banker operating in the region. “We will probably see a few more banks in the next couple of weeks announce some plans or the other.”
Companies, especially financial institutions, are queueing up to get both sukuk and conventional paper out there because of excellent issuance conditions.
“This is a fantastic time – rates are low and benchmark rates are low,” he said. He quoted the example of the recent issuance by National Bank of Abu Dhabi earlier this month.
“A seven-year deal was priced at MS plus 180bp, just five months after they priced a five-year at MS plus 190bp,” he said. “Credit spreads have come in a lot.”
The five-year is now trading at MS plus166bp, he added.
QIB was last in the market in 2010, when it priced a US$750m 3.856% five-year sukuk at par, or 237.5bp over mid-swaps, via Credit Suisse, HSBC and QInvest. At the time, this was the tightest yield and first sub-4% coupon from a Persian Gulf financial institution in two years.
It could well beat that record now, a banker said.
“There is a fair amount of liquidity in the market in this region for Islamic paper,” said Shahzad Shahbaz, chief executive of QInvest, QIB’s investment banking arm.
“The State of Qatar’s deal is a very good example that a large amount of capital can be issued,” he said. QInvest was one of the bookrunners on that deal. For the right kind of issuer, the market is there right now for issuance, he added.
The planned partnership between Qatar’s QInvest and Egyptian investment bank EFG Hermes is expected to be signed off in late October or early November, Shahbaz told IFR.
The deal, which will see the two banks set up a joint investment bank, was supposed to be completed before September but will now be delayed by four to six weeks because of regulatory issues, he said.
“The Egyptian FSA has raised some questions on the extent of disclosure that EFG had made in the EGM where shareholders voted on the deal,” Shahbaz explained. “They have asked for some additional clarifications to be made to the shareholders.”
In the next few weeks, EFG will hold another EGM to provide more information, he added. Assuming it is passed and the regulator is happy, the deal should be completed by November, he said.
The partnership will give QInvest expanded reach in the Gulf region and will also give it access to a brokerage business, which is very had to establish organically, he said.
“EFG has a strong market position, especially in the brokerage business, where it is the top bank in the region,” Shahbaz said.
State-owned Qatar Telecom today repaid a US$3bn loan facility using existing funds, as it continues to work on a full takeover of its Kuwaiti unit Wataniya.
The five-year syndicated term loan was signed in August 2007 through bookrunners Barclays, BNP Paribas, DBS and RBS, and was priced at 65bp over Libor, according to Thomson Reuters data.
Qtel said in April that it would use its own cash to repay any obligations maturing in 2012 and that it was not undertaking any refinancing options.
The announcement followed a Reuters LPC report earlier in April which said Qtel had submitted requests for proposals to international lenders to refinance up to US$2bn in syndicated loans.
Two bankers told Reuters LPC that the company was looking to split the US$2bn financing between a US$1bn standby commercial paper and a US$1bn revolving credit facility, to be used for the refinancing of a US$3bn five-year loan signed in 2007 that matures in October.
Elsewhere, Fitch Ratings has affirmed Abu Dhabi’s International Petroleum Investment Company at AA, with a stable outlook, in line with Abu Dhabi’s current sovereign ratings.
IPIC’s standalone credit profile is in the BB category, the ratings agency said, noting the company’s relatively weak credit ratios compared with other investment holding entities.
Fitch also noted that IPIC’s liquidity is “presently limited”, estimating that the parent company holds around US$1.3bn of available cash compared to US$1.5 in 2012 debt maturities.