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GCC sees debt maturities of $321b by 2025

Dubai - Banks in UAE have the biggest maturities over the next five years at $45.4 billion

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GCC governments are expected to see $157.1 billion in bond and other fixed-income maturities over the next five years (2021-2025) whereas corporate maturities stand at $164.3 billion.

The UAE has the biggest share of upcoming maturities until 2025 at $99.2 billion closely followed by Saudi Arabia and Qatari issuers at $97.1 billion and $72.4 billion, respectively, Kamco Invest said.

Loan maturities in the GCC region are also almost at the same level over the next five years as bonds and sukuk at $299.3 billion, the Kuwait-based asset management company said in its report.

UAE corporates account for the bulk of the scheduled repayments over the next five years at $131.0 billion followed by Saudi Arabian and Qatari corporates with scheduled repayments of $100.4 billion and $28.6 billion, respectively.

A majority of these maturities are denominated in dollar at 61.3 per cent followed by local currency issuances in Saudi riyal and Qatari riyal at 17.8 per cent and 7.6 per cent, respectively.

In terms of type of instruments, conventional bonds dominate with $205.7 billion in maturities over the next five year whereas sukuk maturities are expected to be at $115.7 billion. While bond maturities show a declining trend over the next five years, sukuk maturities are expected to increase starting from 2022.

Banks and other financial services sector have $98.0 billion in maturities in the next five years, accounting for around 60 per cent of the total corporate maturities and 30.5 per cent of the total maturities in the GCC until 2025.

The energy sector was next with maturities of $15.3 billion or 9.3 per cent of GCC corporate maturities until 2025 followed by utilities and airlines at $11.4 billion and $11.2 billion, respectively.

Banks in UAE have the biggest maturities over the next five years at $45.4 billion followed by Qatar at $ 26.4 billion. Banks in the two countries accounted for 22.3 per cent of total bond/sukuk maturities over the next five years in the GCC, Kamco said.

Outlook GCC bond and sukuk issuances witnessed year on year gains for the second consecutive year in 2020 and trends for the coming year shows flat to slight decline in issuances in 2021.

“We believe that the year 2020 was an exceptional year with extreme events like the steep fall in economic growth rates across the globe and in the GCC as well as the historic decline in oil prices that particularly affected the oil-exporting economies in the GCC,” Kamco said.

Budget spending needs by the government is expected to drive sovereign issuances next year. “However, with a significantly smaller expected deficit of around $84.3 billion in 2021 as against $127 billion in 2020, we expect government issuances to decline y-o-y in 2020.” A number of GCC governments have announced a cut in spending next year and to focus on priority projects.

In 2020, year to date, GCC governments have issued $47.5 billion in bonds with $35.4 billion during the first half of 2020. Sukuks issued by the governments stood at $28.7 billion and was almost equally split during the first half the second half of the year.

In 2019, bond issuances by governments in the region aggregated to $48.8 billion while sukuks issued were at $34.3 billion. On the other hand, corporate issuances have also been active with $ 46.2 billion in bond issuances this year until November-2020, whereas sukuk issuances stood at $19.9 billion. This compares to last year’s $45.3 billion bonds and $14.8 billion in sukuks.

In 2020, the pandemic has resulted in almost 48 sovereign downgrades and 13 upgrades by the three rating agencies this year and numerous corporate downgrades globally. “However, with interest rates at one of the lowest levels, the cost of funding has not been significantly affected. In terms of ratings action in the GCC, Bahrain, Kuwait, Oman and Saudi Arabia witnessed downgrades by either one or more of the three rating agencies, especially around the peak of the pandemic,” said Kamco.

issacjohn@khaleejtimes.com