Bahrain gets $2 billion with second bond sale of the year

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Bahrain locked in $2 billion with its second international bond sale of the year on Wednesday as the heavily indebted Gulf country moves quickly to raise extra cash, with financing conditions expected to tighten.

Manama was marketing dual-tranche dollar-denominated bonds comprising sukuk and conventional portions, according to term sheets reviewed by Reuters.

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It sold $1 billion in 7-1/2-year sukuk at 3.875 percent and $1 billion in 12-1/2-year conventional bonds at 5.625 percent, a term sheet showed.

That was tightened from initial guidance of 4.25 percent to 4.375 percent for the sukuk, or Islamic bonds, and between 6 percent and 6.125 percent for the conventional bonds after final combined orders topped $4.6 billion, the document showed.

The proceeds will be used for general budgetary purposes, the debt sale’s offering circular reviewed by Reuters showed.

BNP Paribas, Citi, JPMorgan and National Bank of Bahrain arranged the debt sale.

Rated below investment grade, Bahrain was bailed out to avoid a credit crunch in 2018 with a $10 billion package from wealthier Saudi Arabia, Kuwait and the United Arab Emirates.

That money was linked to plans to fix its finances by reining in state spending, but after the coronavirus crisis strained its finances, Bahrain in September postponed plans to balance its budget by two years.

Ratings agency Moody’s said on Tuesday it expected Bahrain to receive additional financing from its Gulf allies to cover its needs and mitigate liquidity risks.

Saudi Arabia, Kuwait and the UAE last month reiterated their support for Bahrain’s plans to balance its budget, but they have not yet publicly committed additional funding.

Bahrain’s public debt climbed to 133 percent of gross domestic product last year from 102 percent in 2019, according to the International Monetary Fund.

Saudi Arabia on Tuesday raised $3.25 billion in bonds, as borrowers take advantage of accommodating financial conditions ahead of expectations of policy tightening from the US Federal Reserve.

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