MIDEAST DEBT-Buyer beware as Gulf 'club' bonds risk eroding value - Reuters:
The practice of Gulf banks clubbing together on debt issues to guarantee demand for major borrowers is in danger of eroding value for international investors, banking and market sources said, following a poor market run for Saudi Aramco’s debut bond.
Regional issues of hard-currency conventional and Islamic bonds, known as sukuk, have ballooned as Gulf Arab governments and corporates, seeking to offset the impact of lower oil prices, increasingly rely on external debt sales to raise funds and spur economic growth.
To make sure such borrowers get the funds they are after, several banks are arranging bond issues like “club” loans to guarantee those borrowers sufficient demand, often within a specific pricing range - perpetuating a traditional regional practice that undermines market transparency and dents competition.
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