Qatar’s real estate bonds worst-hit in Gulf amid Middle East row

Ezdan’s 2022 sukuk rose 1.7% Monday with yields dropping 40bps

The worst-performing bonds in the Gulf region last week were two sukuk issued by Qatar’s Ezdan Holding Group. Sharia-compliant debt sold by the real estate company, mainly to private banks and wealthy individuals, sank as much as 9.9 per cent, pushing yields up 245 basis points (bps) to 7.21 per cent, according to data compiled by Bloomberg.

The dollar-denominated bonds rebounded Monday as Qatar Finance Minister Ali Shareef Al Emadi said the economy can withstand a rupture of diplomatic ties with a Saudi Arabia-led group of Arab nations.

Saudi Arabia, the United Arab Emirates, Egypt and Bahrain broke off relations with Qatar on June 5, citing dealings with Iran and the funding of Islamists. That triggered a rating downgrade of Qatar’s sovereign debt by S&P Global Ratings, which said it was reviewing the nation’s credit for further cuts.

Ezdan’s bonds are held primarily by high net-worth individuals and private banks, some of which was bought using borrowed money, according to Abdul Kadir Hussain, the head of fixed-income asset management at Arqaam Capital Ltd. The debt has the lowest investment-grade ranking from S&P and a junk rating from Moody’s Investors Service.

“The selling was quite disciplined initially,” but gathered pace towards the end of the week as some of the borrowed funds were called back from investors, Hussain said.

Qatari officials struck a defiant tone on Monday, as the crisis in the Gulf entered a second week with no sign of a diplomatic resolution between the tiny Arab state and a Saudi-led bloc. Foreign Minister Mohammad Al Thani expressed his government’s frustration at not receiving specific demands from the Saudi alliance, which he said meant there was no basis for a diplomatic solution.

Ezdan’s 2022 sukuk rose 1.7 per cent on Monday with the yield dropping 40 basis points, while the 2021 security rebounded 1.6 per cent. Ezdan sold its 2022 sukuk in March, raising $500 million (Dh1.83 billion) at a profit rate of about 5 per cent.

The company’s shareholders approved a plan last month to convert the real estate firm to a private company. Before that decision, the company had the second-biggest weighting on Qatar’s benchmark stock index.