DUBAI Oct 9 Kuwait has delayed a sovereign bond
issue of up to $10 billion until next year after deciding it is
in no rush to raise funds overseas, bankers familiar with
Kuwaiti debt policy said.
Finance Minister Anas al-Saleh said in July the government
planned to sell as much as $10 billion of U.S.
dollar-denominated conventional and Islamic bonds in
international markets to help plug its budget deficit for the
current fiscal year, which will end on March 31.
Officials subsequently said they were looking at a window of
September or possibly October for the issue.
But the government has still not sent banks a request for
proposals to arrange the issue, while the sale still needs
official approval by the Ministry of Finance, said one of the
bankers. This means the deal will definitely take place in 2017,
"The government has not mandated banks on the bond, which
would suggest that they were targeting a later release post-the
Saudi Arabia one," said Dima Jardaneh, head of regional economic
research at Standard Chartered. This implies the first quarter
of 2017 is a likely time period for the issue, she said.
Kuwait's Ministry of Finance did not respond to requests for
Bankers said Kuwait may have been encouraged to delay its
issue by the approach of a mammoth bond sale by Saudi Arabia,
which is scrambling to finance its own budget deficit. The Saudi
issue, expected to be around $10 billion to $15 billion, is now
anticipated to come in late October.
If Kuwait had issued before Saudi Arabia, demand could have
been limited by investors holding back funds for the Saudi sale.
Now that the Saudi sale is occurring so late in the year, Kuwait
may not have time to issue before financial market participants
start going on holiday in late December.
Kuwait's window of opportunity this year has been shrunk
further by expectations for U.S. monetary policy: 14 of 15
primary dealers polled by Reuters forecast an interest rate hike
at the U.S. central bank's mid-December meeting.
But bankers said they believed the main reason for the delay
was Kuwait's financial position. Although its state budget has
been pushed into the red by low oil prices, like Saudi Arabia's,
Kuwait's finances are much stronger and its need to raise funds
is not as urgent as Riyadh's.
Compared to Saudi Arabia, Kuwait "has much more room to be
flexible and it has one of the lowest break-even points for oil
prices to balance its budget", said Faisal Hasan, head of
investment research at Kuwait-based KAMCO Investment Co.
Before a transfer of money to its sovereign wealth fund,
Kuwait posted a budget deficit of 4.6 billion dinars ($15
billion) last fiscal year, its first deficit in 17 years - but
that was dwarfed by Saudi Arabia's deficit of nearly $100
billion last year.
"If you go down the list of Gulf Cooperation Council
issuers, in terms of need and requirement to issue, at the top
of the pile there's Saudi Arabia. At the bottom of the pile you
have Kuwait and Dubai," said Abdul Kadir Hussain, head of fixed
income asset management at Arqaam Capital in Dubai.
"Kuwait has the highest flexibility in the region in terms
of timing. As a bond investor I'd expect them to come to the
market when market conditions are good. Spreads now are
attractive but not outright cheap, so I'm not surprised they'd
delay the issuance."
(Editing by Andrew Torchia and Susan Fenton)