Govt post­pones $10 bil­lion bond is­sue un­til 2017

Kuwait Times - - FRONT PAGE -

DUBAI: Kuwait has de­layed a sov­er­eign bond is­sue of up to $10 bil­lion un­til next year af­ter de­cid­ing it is in no rush to raise funds over­seas, bankers fa­mil­iar with Kuwaiti debt pol­icy said. Fi­nance Min­is­ter Anas Al-Saleh said in July the gov­ern­ment planned to sell as much as $10 bil­lion of US dol­lar-de­nom­i­nated con­ven­tional and Is­lamic bonds in in­ter­na­tional mar­kets to help plug its bud­get deficit for the cur­rent fis­cal year, which will end on March 31.

Of­fi­cials sub­se­quently said they were look­ing at a win­dow of Septem­ber or pos­si­bly Oc­to­ber for the is­sue. But the gov­ern­ment has still not sent banks a re­quest for pro­pos­als to ar­range the is­sue, while the sale still needs of­fi­cial ap­proval by the Min­istry of Fi­nance, said one of the bankers. This means the deal will def­i­nitely take place in 2017, he added.

“The gov­ern­ment has not man­dated banks on the bond, which would sug­gest that they were tar­get­ing a later re­lease post-the Saudi Ara­bia one,” said Dima Jar­daneh, head of re­gional eco­nomic re­search at Stan­dard Char­tered.

This im­plies the first quar­ter of 2017 is a likely time pe­riod for the is­sue, she said. Kuwait’s Min­istry of Fi­nance did not re­spond to re­quests for com­ment.

Bankers said Kuwait may have been en­cour­aged to de­lay its is­sue by the ap­proach of a mammoth bond sale by Saudi Ara­bia, which is scram­bling to fi­nance its own bud­get deficit. The Saudi is­sue, ex­pected to be around $10 bil­lion to $15 bil­lion, is now an­tic­i­pated to come in late Oc­to­ber. If Kuwait had is­sued be­fore Saudi Ara­bia, de­mand could have been lim­ited by in­vestors hold­ing back funds for the Saudi sale. Now that the Saudi sale is oc­cur­ring so late in the year, Kuwait may not have time to is­sue be­fore fi­naan­cial mar­ket par­tic­i­pants start go­ing on hol­i­day in late De­cem­ber.

Kuwait’s win­dow of op­por­tu­nity this year has been shrunk fur­ther by ex­pec­ta­tions for US mon­e­tary pol­icy: 14 of 15 pri­mary deal­ers polled by Reuters fore­cast an in­ter­est rate hike at the US cen­tral bank’s midDe­cem­ber meet­ing. But bankers said they be­lieved the main rea­son for the de­lay was Kuwait’s fi­nan­cial po­si­tion. Al­though its state bud­get has been pushed into the red by low oil prices, like Saudi Ara­bia’s, Kuwait’s fi­nances are much stronger and its need to raise funds is not as ur­gent as Riyadh’s.

Com­pared to Saudi Ara­bia, Kuwait “has much more room to be flex­i­ble and it has one of the low­est breakeven points for oil prices to bal­ance its bud­get”, said Faisal Hasan, head of in­vest­ment re­search at Kuwait­based KAMCO In­vest­ment Co. Be­fore a trans­fer of money to its sov­er­eign wealth fund, Kuwait posted a bud­get deficit of KD 4.6 bil­lion ($15 bil­lion) last fis­cal year, its first deficit in 17 years - but that was dwarfed by Saudi Ara­bia’s deficit of nearly $100 bil­lion last year.

“If you go down the list of Gulf Co­op­er­a­tion Coun­cil is­suers, in terms of need and re­quire­ment to is­sue, at the top of the pile there’s Saudi Ara­bia. At the bot­tom of the pile you have Kuwait and Dubai,” said Ab­dul Kadir Hus­sain, head of fixed in­come as­set man­age­ment at Arqaam Cap­i­tal in Dubai. “Kuwait has the high­est flex­i­bil­ity in the re­gion in terms of tim­ing. As a bond in­vestor I’d ex­pect them to come to the mar­ket when mar­ket con­di­tions are good. Spreads now are at­trac­tive but not out­right cheap, so I’m not sur­prised they’d de­lay the is­suance.”

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