The Kingdom of Bahrain launched a dollar bond deal on Wednesday on the back of upbeat market sentiment, raising $2bn across three tranches. Details of the issuance are as follows:

Bahrains New Bond

Yield-hungry investors placed orders exceeding $10.15bn, over 5x issue size, which allowed the small oil-producing nation to tighten final pricing by 50-62.5bp across the three tranches. The new bonds are expected to be rated B+ in line with Bahrain’s issuer rating. According to the bond prospectus reviewed by Reuters, Bahrain’s fiscal deficit is said to have widened by over 2x to $4.4bn in 2020 vs. a budgeted $2.1bn. The prospectus further stated that the Gulf nation is expected to receive $1.85bn in interest-free aid in 2021 from neighbors Saudi Arabia, UAE and Kuwait as part of a $10bn aid pledge made in 2018, of which $6bn has already been received, albeit with a warning, “Saudi Arabia and other GCC countries have also been significantly negatively impacted by the COVID-19 pandemic and low oil prices, and such factors may reduce the likelihood of additional support and timing of any payment.” The prospectus mentions an expected fiscal deficit of $3.4bn in 2021 and $3bn in 2022. Investors do not seem worried, based on comments from Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital, who said, “Our estimate is that they will need $3-4 billion this year, with around $2 billion from this issue and then probably $1 billion sukuk, so they may not need a lot more in the conventional market this year.”

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