LONDON, March 13, (RTRS): Kuwait is set to raise $8bn through a dual tranche offering of five and 10-year notes, according to a lead. The sovereign has launched a $3.5bn March 2022 bond at 75bp over Treasuries, and a $4.5bn March 2027 note at plus 100bp.
The final spreads compare with guidance of plus 85bp area and 110bp area respectively. Initial price thoughts were plus 100bp area and plus 120bp area. Overall demand for the deal is about $29bn, including lead interest. The 144A/Reg S deal is today’s business. Citigroup, HSBC and JP Morgan are the global coordinators. Kuwait is rated AA/AA (S&P/Fitch).
The government indicated last year that it planned to raise as much as roughly $10 billion through the issue. But as oil prices rebounded in the past few months, some investors thought Kuwait, no longer needing the cash as urgently, might limit the size of the bond in order to obtain a cheap interest rate. Kuwait’s initial price guidance on Monday, however, suggests the government may plan a sizeable issue.
Guidance for its planned five-year tranche, which was set in the 100 basis points over US Treasuries area, would put the paper 55 bps above the yield of Abu Dhabi’s five-year 2021 bond in the secondary market. Kuwait’s planned 10-year tranche, marketed in the 120 bps over Treasuries area, would be 45 bps above Abu Dhabi’s 10-year notes maturing in 2026. “It’s definitely on the higher end of expectations, but you have to expect the standard tightening of at least 20 bps” from the initial price thoughts, said a fixed income portfolio manager.
Even factoring in a 20-25 bps tightening from initial guidance, the bond would still offer a new issue premium of around 20-30 bps over Abu Dhabi’s five- and 10-year paper. Abu Dhabi is generally seen as the gold-standard credit in the Gulf region, and Kuwait marketed itself “as the new Abu Dhabi” when it met fixed income investors in London and the United States last week, investors said.