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3 Minute Read (including size, launch, spreads/yield, demand, context, and quotes) (Reuters) – DUBAI, June 30 (Reuters) – According to a document, Qatar Petroleum (QP), one of the world’s top LNG exporters, sold $12.5 billion in a huge four-tranche bond offer on Wednesday, its first public bond sale and the largest issuance out of emerging markets this year. After combined orders topped $41 billion, QP tightened the spreads across all four tranches by 30 basis points (bps), according to a document from one of the deal’s banks. QP sold $1.5 billion of five-year paper at 50 basis points over UST, $3.5 billion of ten-year paper at 90 basis points over UST, $3.5 billion of twenty-year notes at 3.15 percent, and $4 billion of 30-year Formosa bonds at 3.3 percent. The bonds were about 10-15 basis points broader than the sovereign’s curve, which investors contrasted to the debt of Saudi oil behemoth Aramco vs Saudi sovereign debt. “Aramco, which is around 10-15 bps bigger than the sovereign, is the most obvious analog to QP. However, QP is responsible for 80% of Qatar’s budget “According to Zeina Rizk, executive fixed income director at Arqaam Capital, Aramco’s contribution to Saudi Arabia’s budget is “sus 60 percent.” The 10-year paper and the Formosa bonds, which were sold in Taiwan by overseas borrowers and denominated in currencies other than the Taiwanese dollar, drew the highest interest, with over $12 billion apiece. 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. In February, Qatar Petroleum inked a deal for the first phase of its North Field LNG expansion project, which intends to increase Qatar’s LNG output from 77 million tonnes per annum (mtpa) to 126 million tonnes per annum (mtpa) by 2027. According to the prospectus, QP, its subsidiaries, and joint ventures will spend 300 billion riyals on capital expenditures between now and 2025. According to a bonds prospectus accessed by Reuters, QP made a profit of 18.1 billion riyals ($4.90 billion) in the first quarter of 2021, up from 13.3 billion riyals the year before. Fitch Ratings gave QP an AA long-term rating, matching Qatar’s sovereign rating, stating that it was “limited by the lone stakeholder – Qatar.” Completion risk for big capital expenditure projects connected to rising LNG production, as well as political risk, are two key restrictions on QP’s rating, according to Fitch. Demand was “driven by assumed lack of sovereign issuance given higher oil prices and improving credit fundamentals (low budget financing needs), and view that QP is cheap sovereign exposure given 100 percent state ownership,” according to Timothy Ash, senior EM sovereign strategist at Bluebay Asset Management in London. The sale was handled by Citi, JPMorgan, BofA Securities, Deutsche Bank, Goldman Sachs, HSBC, MUFG, QNB Capital, and Credit Suisse. Yousef Saba and Yousef Saba contributed reporting. Marguerita Choy edited the piece./nRead More

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