DUBAI: Qatar will issue eight-year conventional bonds worth 5 billion riyals ($1.37 billion) with a coupon of 6.5 percent on Tuesday, while the same-sized Islamic portion awaits approval, a central bank source told Reuters on Tuesday.
The issues should help Qatar — the world’s top natural gas exporter — launch a local debt market and provide a new vehicle to pool the excess liquidity in the banking sector.
The central bank source said the Islamic part would be ijara-based with a coupon paid semi-annually, but the issue date and the coupon size is still to be set.
"The coupon will be paid every six months but the sukuk may not be (issued) today, only 5 billion in government (conventional) bonds. It is still waiting for the authorization from the government," the source said.
He confirmed earlier comments on conventional terms of the deal by another person familiar with the matter.
Ijara is a structure in which an Islamic bank buys an asset and leases it to a customer for an agreed rental fee instead of charging an interest, which the religion forbids.
The issue will be evenly split with five local conventional banks getting 1 billion riyal each with no bidding competition, while four Islamic banks will share the rest.
"It will be allocated to banks, the conventional is 6.5 percent a year coupon issued at par," the banking source said. "It (the bond) is transferable within Qatar, but not externally."
The bonds are expected to be listed later this year on the Qatar Exchange, which is still to set up a facility for debt trading.
Finance Minister Youssef Kamal was quoted in the Financial Times on Monday as saying that the issue was aimed at diversifying funding away from US dollars.
Cash-rich Qatar issued $7 billion in dollar-denominated bonds in November, marking the largest sovereign debt issuance in the Arab Gulf, which attracted a reported order book of over $30 billion.