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Background The State of Qatar sought to tap the international capital markets in a bid to fund a widening budget deficit (US$12.5bn) generated by lower than anticipated oil revenues. The sovereign’s goal was to access liquidity from a broad range of global investors at competitive market prices, and re-establish its credit curve after a three year absence from the markets. What was originally expected to be a circa US$5bn bond issuance nearly doubled in size off the back of strong demand from nearly 900 accounts. On 25 May, the State of Qatar issued a whopping US$9bn bond with tranches maturing in 5, 10 and notably, 30 years, generating over US$22bn in orders from global investors. Transaction Breakdown A deal roadshow and bookbuilding process in May spanned all four dominant investor regions including physical roadshows in Asia, Europe and the US and a targeted four-day roadshow in Hong Kong, Los Angeles, Singapore, Boston, New York and London. After being well-received and generating over US$20bn in orders from nearly 760 accounts, the sovereign launched the US$9bn triple-tranche trade with the 5, 10 and 30 year tranches carrying initial price thoughts (IPT) of MS+140bp, MS+180bp, and MS+280bp respectively. The depth and breadth of the orderbook allowed the sovereign to tighten pricing by 20bp on the 5 and 30-year tranches, and by 15bp on the 10-year tranche. The 5, 10 and 30-year tranches priced at MS+125bp / UST+120bp, MS+165bp / UST+150bp, and MS+260bp / UST+210bp respectively. The notes generated a final orderbook of nearly US$22bn from approximately 900 accounts and represented the largest CEEMEA bond offering to date, trading well in the secondary market. |
One novel aspect of the deal was the inclusion of a 30-year tranche, which significantly impacted the volume achievable, the profile of the transaction, and the quality of investors involved. The 5-year tranche saw fund managers allocated 40%, insurance pension funds 6%, banks and private banks 39%, and agency & central banks 15% of the notes. The 10-year tranche saw fund managers pick up 31%, banks and private banks 52%, agencies and central banks 5%, and insurers & pension funds 12%. The 30-year tranche saw fund managers pick up 54%, banks and private banks 10%, agency & central banks 1%, and insurers & pension funds 35%.
In terms of geography, 50% of the 5-year notes were allocated to accounts in the US, 10% in MENA, 10% in Asia, 15% in Europe, and 15% in the UK. About 55% of the 10-year notes were allocated to accounts in the US, 5% in MENA, 10% in Asia, 10% in Europe, and 20% in the UK. Roughly 53% of the 30-year tranche was picked up by accounts in the US, 5% in MENA, 12% in Asia, 10% in Europe, and 20% in the UK.
