Bahrain gives no details about aid from Gulf neighbours

The country plans to sell a multi-tranche, US dollar-denominated sovereign bond

Bahraini officials conducting a roadshow for investors ahead of a possible sovereign bond issue have not disclosed details of additional financial support that the country may receive from its Gulf neighbours, fund managers at the meetings said.

The country plans to sell a multi-tranche, US dollar-denominated sovereign bond after a series of investor meetings that started last Friday in London and are continuing this week in the Middle East, the United States and Asia. The tiny Gulf kingdom is rated junk by the three major credit rating agencies. But so far it has borrowed successfully in the international debt market because investors believe it can count on support from its Gulf neighbours, particularly Saudi Arabia, if its finances deteriorate further.

However, some investors, concerned by Bahrain’s mounting debt levels and the impact of rising US interest rates on its debt, are now starting to demand an explicit statement from Bahrain on its expectations for aid before they commit fresh money, fund managers in Europe and the Gulf said.

S&P estimates the ratio of Bahrain’s government debt to gross domestic product jumped to 81 per cent in 2017 from 34 per cent in 2012, and the rating agency expects the ratio to reach 98 per cent by 2020.

After bottoming at 201 basis points in May 2017, the cost of insuring Bahrain’s debt against default has risen to 258 basis points, implying a 16.9 per cent chance of default over the next five years.

One investor who took part in one of this month’s roadshow meetings, speaking on condition of anonymity because they were not open to the public, said Bahraini officials were pressed at the meetings on the issue of financial aid but did not give specific answers. “They didn’t say anything at all — they gave casual answers. I had the impression they just didn’t know about support from Saudi,” the investor said.