The government of Bahrain has privately placed a $435m, three-year sukuk issue in a deal arranged by Noor Bank, Bank ABC and Kuwait Finance House, a source with direct knowledge of the deal said on Sunday.
The deal was priced in the area of 325 basis points over midswaps, the source said. Bahraini central bank officials could not be contacted for comment.
Bahrain, its state finances strained by low oil prices, is stepping up its borrowing and in late February borrowed $600m in a two-tranche reopening of a previous U.S. dollar bond issue.
On Saturday Moody’s Investors Service cut its rating of Bahrain’s sovereign debt by one notch to Ba2, taking the rating deeper into junk territory, with a negative outlook.
While Bahrain can expect support from its ally Saudi Arabia in a crisis it is likely to find it increasingly hard to borrow in the international markets, particularly since it will be competing for money with its neighbours, Moody’s said.
“The further deterioration in the government’s balance sheet, combined with increased external debt issuance from other countries in the region, will lower the supply of external funding, thereby heightening the risk that finance is obtainable only at much less affordable rates for Bahrain, or potentially reduced amounts.”