The world's top liquefied gas importer and one of its wealthiest nations has mandated six banks to conduct roadshows with investors and a bond issue may follow, according to lead managers on Tuesday.
"Qatar is an extremely wealthy nation and with yields low, it seems an opportunistic time to tap the debt markets as well as continue building a yield curve," Nish Popat, senior investment manager at ING Investment Management, said.
Investors expect strong demand given the country's healthy economy. Analysts polled by Reuters in September forecast Qatar would grow by 18.9 percent in 2011, slowing to 7.7 percent in 2012 as the country's decades-long gas expansion program winds down.
Its fiscal surplus is expected to reach 8.9 percent of gross domestic product in 2011.
Although there is no indication yet on the use of proceeds of an eventual bond, the country will host the 2022 World Cup and has allocated 40 percent of its budget between now and 2016 to infrastructure projects.
Global economic woes and more recently the worsening of the euro zone sovereign debt crisis have pushed yield spreads wider for Gulf issuers, but historically low US Treasury rates mean that pricing in absolute terms is attractive, especially given the strong global appetite for top-rated government-linked names.
Last month, Abu Dhabi's International Petroleum Investment Co. (IPIC) issued a three-tranche conventional bond, reopening global debt markets for regional borrowers. The $3.75 billion issue was reportedly significantly oversubscribed.
Qatar, along with Abu Dhabi rated at AA, has been largely shielded from the political upheaval that has swept across the Middle East, and both are seen as relative safe havens amid the ongoing volatility.
Qatar will also seek to use a shrinking window of opportunity to launch a deal before the end of the year, jostling with a number of other potential issuers planning bonds.
"Right now is the time to jump on the issuing bandwagon," said a regional fixed income trader. "(Qatar) wants to take advantage of this recent pricing. If Abu Dhabi Islamic Bank can launch at 245 basis points over midswaps, then they can get pretty tight pricing."
Earlier on Tuesday, Abu Dhabi Islamic Bank priced a $500 million Islamic bond, or sukuk, the latest in a string of issuers from the region seeking to take advantage of demand for the asset class.
While many of the recently priced or planned deals are from financial institutions, Bahrain, hit by popular protests this year, tested investor sentiment with a $750 million 7-year sukuk last week, which offered a yield of 6.273 percent.
"The pipeline of issues coming out of the Middle East in the final quarter of the year has been very strong," ING's Popat said.
Qatar selected Citi, J.P. Morgan, HSBC, Mitsubishi UFJ, Qatar National Bank and Standard Chartered to arrange roadshows, which take place in London on Nov. 25 and in New York on Nov. 28.
A 144a bond — open to institutional investors in the United States — may follow "subject to market conditions."
Qatar's last bond was a three-tranche, $7 billion issue in November 2009, just before Dubai's debt crisis broke and shut regional bond markets for months.
