* Kuwait meeting with investors on debut international bond
* May issue less than originally expected $10 bln
* Investors largely ignore politics, slow reforms
* Focus on comfortable fiscal position relative to Gulf
* Bond could trade in line with, even inside Abu Dhabi
By Davide Barbuscia
DUBAI, March 7 Kuwait's first public bond issue
in the global market is set to price between Abu Dhabi
government debt, long viewed as the gold standard in the Gulf,
and Qatar, investors say.
Kuwait is issuing foreign debt because of low oil prices,
which have slashed its export income. It has been slower than
other Gulf states to cut wasteful spending and raise new
Its financial fundamentals are strong, however, due to its
huge oil reserves, low cost of exploiting them and small
population, analysts say. The International Monetary Fund
projects Kuwait will be the only one of the six Gulf Cooperation
Council States to run a fiscal surplus this year.
Zeina Rizk, director of fixed income asset management at
Arqaam Capital, a regional investment bank, said Kuwait might
need to pay a "first issue premium" for its debut bond, causing
it to price between Abu Dhabi and Qatar.
But "given the better fundamentals, it is likely to trade in
line with or even slightly inside Abu Dhabi," she added.
Kuwait has indicated it plans to issue five- and 10-year
Abu Dhabi's five-year bond maturing in May 2021
was yielding 2.45 percent on Tuesday, while its
10-year notes due in 2026 yielded 3.31 percent.
Qatar’s 2021 bonds are at 2.69 percent and
its 2026 bonds, at 3.51 percent.
Kuwait said last year that the issue might be $10 billion,
but some investors now think the amount may be less, due to a
partial rebound in oil prices and because some in government
oppose amassing foreign debt.
Max Wolman, senior portfolio manager at Aberdeen Asset
Management, forecast emerging markets investors would provide
heavy demand for the Kuwaiti bonds, causing them to trade
somewhere between Abu Dhabi and Qatar.
Some investors have been expecting Kuwait to include a
30-year tranche in its issue, as Saudi Arabia and Oman did for
their successful issues in recent months.
But although Kuwait is preparing a draft law to allow
maturities of up to 30 years, an existing law limits its
borrowing to maturities of up to 10 years, an IMF document
One Dubai-based fund manager said Kuwait might present a
“boring story, in a good way” when compared with Abu Dhabi.
“Kuwait has the advantage of being a sovereign over Abu
Dhabi, which is an emirate, and the United Arab Emirates
theoretically include more leveraged emirates like Dubai and
more deficit-heavy Sharjah," the fund manager said.
"Kuwait is clean in that sense, and has no real contingent
liabilities, which even Abu Dhabi has a lot of through
(Additional reporting by Sudip Roy in London; Editing by Andrew
Torchia and Richard Lough)