Morning Commentary: Bahrain launches sukuk but halts conventional bond; Turkcell eyes 10-year bonds

By Rebecca Melvin

New York, March 28 – The Kingdom of Bahrain launched a $1 billion 7.5-year sukuk, or Islamic bond, on Wednesday but decided to forego the 12- and/or 30-year conventional bonds that were also expected to price, according to market sources.

The new sukuk was launched to yield 6 7/8%, which was the tight end of guidance in the 7% area.

The fact that the conventional bonds were nixed was not overly surprising because market volatility has put a shadow of uncertainty over the whole market. But by all reports this week, Bahrain was expected to go ahead with the issuance in spite of market conditions and widening in its existing bonds after the new deal was announced last week.

“Clearly they got no real support for it,” a London-based trader said.

The planned dual or triple tranche followed fast on the heels of Bahrain’s $3 billion of notes that priced last September. That deal included its $850 million 5¼% sukuk due 2025, a $1.25 billion 6¾% conventional bond due 2029 and a $900 million 7½% conventional bond due 2047. Final terms for those tranches came 25 bps or more below talk.

For the current deal, it was expected that investors were generally bearish without stronger indication of Saudi fiscal support, a London-based market source said.

But, the source added, the sovereign has funding needs of $7.5 billion in 2018, so the 12- and 30-year paper may be revisited later in the year.

Elsewhere, Turkish mobile phone operator Turkcell Iletisim Hizmetleri AS announced that it has mandated banks and scheduled a roadshow for a dollar-denominated benchmark of 10-year bonds.

BNP Paribas, HSBC and JPMorgan were chosen to arrange the series of fixed-income investor meetings in Europe and the United States starting April 3.

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