Qatar’s US$4 billion sovereign Sukuk sets new benchmark (See IFN)

QATAR: The country achieved what no other sovereign has with its US$4 billion Sukuk sale; offering a record low profit rate of 2.1% for a five-year tranche and 3.24% for a 10-year tranche.

The sale is also the largest US dollar-denominated Sukuk issuance to-date. The tranches were each US$2 billion in size, with the five-year portion yielding 115 basis points (bps) over midswaps and the 10-year tranche priced at 155 bps over midswaps. In comparison, the average yield of the 12 constituents of the HSBC/Nasdaq Dubai Sovereign US Dollar Sukuk Index is 3.56%.

Immense demand for investment-grade debt from the Gulf saw Qatar’s sale book US$24 billion-worth of orders; as investors scramble for safe haven assets amid the ongoing global financial crisis.

Pricing on the Sukuk is also cheaper than that of Qatar’s last debt sale; comprising a US$5 billion conventional bond sold in November 2011. The transaction yielded 3.18% for papers maturing in January 2017 and 5.83% for a tranche due in January 2042.
It is also worth noting that Qatar’s five-year Sukuk tranche was priced over 100 bps lower than Malaysia’s 3.93% sovereign Sukuk.

Barwa Bank, Deutsche Bank, HSBC, Standard Chartered and QInvest were mandated arrangers for the transaction, proceeds of which will be used towards funding state-owned development projects.

Qatar’s is the latest sovereign to come forward with a Sukuk this year, as issuers race to take advantage of borrowing costs that are nearing record lows; pushing global Sukuk market sales to US$21.5 billion in the year-to-date.

See: http://redmoney.newsweaver.co.uk/o74jwlculjth38rwoni3wx?email=true&a=6&p=25776434&t=21632634