Gulf Arab governments may be pressured into increasing sovereign borrowing next year to raise funds on behalf of state-linked companies, as wide credit spreads make raising corporate debt expensive.
This year, Bahrain, Qatar and Dubai issued sovereign bonds, and all paid hefty premiums demanded by investors because of the turmoil in global financial markets. Even AA-rated Qatar paid a new-issue premium of about 40 basis points on the five-year tranche of its $5 billion mega bond in November.
Corporations have faced even more scepticism from investors, so the vast majority of the Gulf's non-sovereign bond issuance this year has been by banks or top-rated government-related entities (GREs), with many other potential borrowers forced to delay issuance plans until pricing improves.
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