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Qatar to raise US$9b in Middle East's biggest bond sale

[LONDON] Qatar is selling US$9 billion of Eurobonds, marking the biggest-ever bond issue from the Middle East where governments are tapping international investors to fill budget holes left by declining oil and gas revenues.

The country is borrowing across three maturities, offering US$3.5 billion in five-year notes at 120 basis points over US Treasuries, the same amount in 10-year bonds at 150 basis points over Treasuries and US$2 billion of 30-year paper at a 210 basis-point spread, according to a person familiar with the transaction.

The amount is almost double the US$5 billion that bankers close to the deal said Qatar was targeting.

The deal follows a US$5 billion Eurobond from Abu Dhabi last month with Middle Eastern sales this year now amounting to more than US$20 billion if Qatar's is included.

Energy-exporting nations are borrowing internationally following a halving of oil prices since 2014 which has forced some governments to raid reserves. Qatar is also in the second year of a US$200 billion infrastructure upgrade ahead of hosting the 2022 soccer World Cup.

"It's quite surprising they printed so much," said Angelo Rossetto, a trader at GMSA Investments Ltd in London, who bid for the bonds. "Qatar printed nearly double expectations but left pricing on the generous side."

Abu Dhabi's sale included a tranche of five-year debt at a spread of 85 basis points last month. This is the first sale in five years from Qatar, the world's largest exporter of liquefied natural gas. The nation's budget deficit will widen to 5.2 per cent of national output this year, according to the median forecast of eight analysts surveyed by Bloomberg.

"The Qataris refused to cut their spending, investing and consumption and spent more cash than they generated," said Lutz Roehmeyer, who helps oversee about US$12 billion as director of fund management at Landesbank Berlin Investment, and bought the five-year bonds.

"First they touched their reserves, waited for a slightly higher oil price and issued that much to refill the reserves again. So it was pent up demand for cash."

Saudi Arabia, also planning a bond issue, will now "have to offer a very generous premium" to investors after Qatar has flooded the market, according to Sergey Dergachev, a senior money manager helping run US$13 billion of emerging-market debt at Frankfurt-based Union Investment Privatfonds GmbH, who bought the bonds.

HSBC Holdings Plc, JPMorgan Chase & Co, Mitsubishi UFJ and QNB Capital LLC are acting as coordinators on the Qatar sale, said the person who isn't authorized to speak publicly and asked not to be identified.