Sovereign Wealth Fund Institute

Mumtalakat Holdings, Bahrain’s sovereign wealth fund will continue to support Gulf Air financially. Gulf Air is the national air carrier in the Kingdom of Bahrain. Unfortunately, Gulf Air will be a strain on the fund’s 2011 earnings. Gulf Air was negatively affected by the political unrest that swarmed the country. Management at Mumtalakat Holdings sees Gulf Air as a challenging asset; however, airlines are a strategic industry for the Kingdom of Bahrain.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

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According to the Wall Street Journal, “Offers for Bahrain Mumtalakat Holding Co.’s first-ever bond issue are in the range of $1 billion to $1.25 billion, according to a source familiar with the sale.

That means the sovereign wealth entity’s debut could be larger than the minimum $500 million benchmark size when it completes on Wednesday. Deutsche Bank, HSBC, JPMorgan and Standard Chartered are leading the sale.

The five-year senior unsecured bonds, rated A by Standard & Poor’s and A from Fitch Ratings, are expected to yield 300 basis points over mid-swaps. Proceeds will be used for general corporate purposes, including to refinance existing debt.

The Kingdom of Bahrain, which owns Mumtalakat outright, issued $1.25 billion in 5.5% bonds on March 24 via JPMorgan, Deutsche Bank and BNP Paribas, according to Dealogic.  In a note on June 21, Standard & Poor’s said there is an “almost certain likelihood that the government of Bahrain would provide timely and sufficient extraordinary support to Mumtalakat in the event of financial distress,” although it does not formally guarantee its liabilities.

Mumtalakat does not make material investment decisions without government consent, S&P added. Most of the company’s assets are in domestic real-estate, telecommunications, aviation, banking and manufacturing. Bahrain owns a separate holding company for oil and gas assets, the National Oil and Gas Authority.  The issuer’s decision to tap the capital markets for the first time was predicated on the Mumtalakat’s need to become more independent from Bahrain, said the source.

“In the wake of the Dubai World issues, Bahrain is trying to push these sovereign entities away from its balance sheet and would like them to fund themselves on their own,” the person said.”

Source: Wall Street Journal

The press release states, “Occidental Petroleum Corporation and Mubadala Development Company (Mubadala), through its business unit Mubadala Oil & Gas, announced today that they have signed a Development and Production Sharing Agreement (DPSA) with the National Oil and Gas Authority of Bahrain (NOGA) for the further development of the Bahrain Field. Under this agreement, a Joint Operating Company will be formed to serve as operator for the project under the DPSA.

Oxy will hold a 48-percent interest in the DPSA, with Mubadala holding a 32-percent interest and a subsidiary of NOGA holding the remaining 20 percent.

‘We are pleased to expand upon our existing relationship with Abu Dhabi and look forward to working with Bahrain on this exciting project,’ said Dr. Ray R. Irani, Chairman and Chief Executive Officer of Occidental. ‘Signing this DPSA is another important step in the implementation of our growth strategy in the Middle East, and the further development of the Bahrain Field will create significant value for the people of Bahrain and for our shareholders.’”

read more: Press Release

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