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3 Minutes to Read Reuters, DUBAI, July 1 – Investors piled into Qatar Petroleum (QP) notes this week, anticipating a slowing in government bond production from the oil-rich Gulf country as crude prices rebounded. According to papers examined by Reuters, QP’s $12.5 billion of bonds – the largest issue among developing markets this year – got orders totaling more than $41 billion on Wednesday. According to investors and bankers, demand was fueled in part by the paper’s attractive pricing, which offered around 10-15 basis points over Qatar’s existing government debt curve. At a time when higher crude prices are reducing budgetary constraints among Gulf energy exporters, it was also an opportunity for investors to unleash pent-up demand and acquire huge volumes of highly-rated paper from a 100 percent government-owned business. A banker who worked on the QP bond deal stated, “A lot of funds are sitting with a lot of cash, and there hasn’t been (much) sovereign issuance.” Qatar, which is rated AA-(minus) by Fitch and S&P Global Ratings and Aa3 by Moody’s, has stated that it does not need to raise debt this year and will only do so if interest rates remain low. It borrowed $10 billion in bonds in April of last year, despite low oil prices and market uncertainties brought on by the coronavirus outbreak. Oil prices were roughly $32 a barrel at the time. Brent crude was trading at $75 a barrel on Wednesday. According to the prospectus for the bonds, QP, which supplies one in every five LNG shipments globally, would use the revenues for operational and investment objectives, including its North Field expansion project. Qatar’s LNG output is expected to increase to 126 million tonnes per annum (mtpa) by 2027, up from 77 mtpa today. “This debt is to dramatically boost their gas output, re-rate the country’s GDP, and substantially strengthen Qatar’s credit metrics,” said Dino Kronfol, Franklin Templeton’s global sukuk and MENA fixed income chief investment officer. He remarked, “These transactions are a good illustration of constructive debt, not debt that merely plugs deficits or pays for bloated bureaucracy.” According to Bank of America, Qatar’s economy might double in size as a result of the LNG expansion plans, with a nominal gross domestic product of roughly $300 billion by 2027. (Yousef Saba contributed to this report.) Davide Barbuscia and Mark Potter edited the piece.)/nRead More

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