April 18, 2018 / 3:39 PM / 3 months ago

Exclusive: Japan's Mizuho loses Saudi bond role in ongoing Gulf rift

DUBAI/LONDON (Reuters/IFR) - Japan’s Mizuho Securities has lost a bond mandate for Saudi Arabia, on top of another for Qatar, banking sources said, highlighting how international banks have been caught up in Qatar’s ongoing dispute with its neighbours.

Mizuho Financial Group's logo is seen next to an electronic board showing stock prices indexes at a branch of Mizuho Securities in Tokyo, Japan January 25, 2017. REUTERS/Kim Kyung-Hoon/Files/Files

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, last year cut diplomatic and transport links with Qatar accusing it of financing terrorism. Doha denies those charges and says the boycott is aimed at stripping it of its sovereignty.

Last week Saudi Arabia and Qatar had more than $100 billion in total orders for competing U.S. dollar denominated bonds. Mizuho Securities, part of Mizuho Financial Group, was offered a leading position in both the $11 billion Saudi issue and the $12 billion Qatar bonds.

But Mizuho ended up without either role, losing a possible $1.5-$2 million in fees which would have accompanied the work, as it tried to juggle relationships on both sides of the rift, four banking sources with knowledge of the matter told Reuters.

Mizuho confirmed in a statement that it had withdrawn from the Qatar bond transaction after it had been appointed as a bookrunner, but it declined to comment on Wednesday about its role on the Saudi Arabian bond.

Saudi Arabia had chosen the banks for its planned bond before Qatar publicly announced its own list on April 6.

However, Mizuho had not informed the Saudis that it was also in the running for the Qatar deal, two of the bankers said, adding this was the reason the Japanese bank was no longer on the Saudi transaction.

Mizuho, which has significant business interests in the kingdom, then decided to pull out of the Qatar transaction.

“The (Saudi) Ministry of Finance appoints banks based on their capability, commitments and availability to serve the kingdom,” a Saudi finance ministry spokesperson told Reuters.

A Qatari official declined to comment on Mizuho’s decision, which shows how international banks with significant business ties to Saudi Arabia have been treading cautiously to maintain relations on both sides of the diplomatic and economic crisis.

SAUDI ARABIA KEY

An expected wave of privatisations in Saudi Arabia and the expected IPO of Saudi Arabian oil giant Aramco, has given banks a money making opportunity they cannot afford to jeopardize.

Mizuho, which earlier this year hired a banker to boost the growth and development of its franchise, was recently hired by Saudi Arabia’s state-owned National Water Co to advise it on bringing private companies into water distribution.

“We are a top-tier banking partner to numerous leading entities in the public and private sectors and Saudi Arabia continues to be a key element of our regional franchise,” Hidefumi Takeuchi, managing director and head of MENA & Central Asia at Mizuho Bank said in a statement earlier this year.

Mizuho’s case is not an isolated one. HSBC had turned down a role in Qatar’s bond as it had decided not to take high-profile roles in major Qatari debt transactions, sources told Reuters earlier this year.

The British bank arranged Saudi Arabia’s $11 billion bond last week, together with a consortium of banks including Citi, Goldman Sachs International, JPMorgan and Morgan Stanley.

No bank on the Saudi deal was involved in Qatar’s $12 billion bond, which was arranged by a group of banks including Deutsche Bank, Credit Suisse, Barclays and Standard Chartered.

Reporting by Davide Barbuscia; Editing by Alexander Smith

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