Qatari Diar Prices $3.5 Billion Bond Deal - WSJ.com

Qatari Diar Finance, the property arm of the Gulf Arab state's sovereign wealth fund, sold a two-part $3.5 billion bond deal Wednesday, according to a person familiar with the transaction.

The $2.5 billion 10-year tranche offers a yield premium of 1.90 percentage points over comparable U.S. Treasurys to yield 5.004%. The $1 billion five-year tranche carries a yield of 3.665%, a premium of 1.80 percentage points over Treasurys.

Both sold below initial price guidance, affirmation that demand for the notes was so high that the issuer does not have to pay as much to attract investors.

Order books swelled early to more than $20 billion for the total deal, according to Andrew Brenner, head of emerging markets at Guggenheim Securities.

Investors said that demand is helped by the government's explicit full backing of the notes.

Qatar has an "extremely high quality" credit rating, said Gorky Urquieta, head of emerging-market debt at ING Investment Management.

As a result, Moody's Investors Service assigned the notes and issuer an Aa2 rating.

"QDF's Aa2 ratings are in line with the sovereign rating of Qatar because the government, acting through the Ministry of Economy and Finance, will unconditionally and irrevocably guarantee the payments in respect of the bonds that QDF plans to issue," said Martin Kohlhase, a Moody's assistant vice president based in Dubai.

Credit rating agency Standard and Poor's last Wednesday assigned a double-A rating to the proposed bond issue. It said most of the proceeds from the deal will finance the development of large-scale real-estate projects in Qatar.

The money will finance future capital expenditures and repayment of certain debts incurred by Barwa, Qatar's second-largest real-estate developer by market value, which is 45% owned by Qatri Diar, said S&P.

Barclays, HSBC, Qatar National Bank, Standard Chartered and Royal Bank of Scotland were in charge of the sale.