DUBAI—In its battle over bonds with Saudi Arabia, Qatar struck back on Thursday.
Qatar raised $12 billion in debt Thursday from foreign investors as it wrestles with economic pressure from a trade boycott engineered by its neighbor. The tiny emirate’s bond sale drew more notice than usual because Saudi Arabia surprised foreign investors with its own, last-minute $11 billion bond sale on Tuesday—just as Qatar had begun talking up its own float this week.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut off diplomatic ties last year with Qatar, accusing the Persian Gulf monarchy of meddling in its neighbors’ affairs and supporting Iran. Qatar denies the charges.
The timing of the Saudi bond sale fueled speculation from bankers that the geopolitical rift between the two countries was now playing out in financial markets.
Qatari officials declined to comment on Saudi Arabia’s bond sale. But in private, Qatari officials and bankers on the deal say Saudi Arabia timed its $11 billion bond to interfere with Doha’s debt plans. They say the Saudis, by selling debt before Qatar did, sought to reduce the amount of cash available to Qatar, affecting the bond’s pricing and pressuring banks not to work on Qatar’s debt deal. Generally, sovereign-debt offerings are spaced apart to maximize the amount of money available for debt issues.
Saudi officials didn’t respond to requests for comment.
Investors showed interest in Qatari bonds, ordering $53 billion worth, with demand coming from Asia, Europe and the U.S., a person familiar with the matter said. The emirate decided to issue $12 billion in debt, the person said.
Qatar’s bond issuance exceeds the $9 billion it raised the last time it tapped foreign debt in 2016.
The sale comes as Qatar’s economy is under pressure.
Qatar last year forecast a nearly $8 billion budget deficit for 2018, though rising energy prices may have narrowed the gap. Sectors such as trade, tourism and hospitality are bearing the brunt of the transport and trade restrictions imposed by the Saudi-led bloc, which accuses the natural-gas-rich Persian Gulf emirate of meddling in their domestic affairs, supporting Islamist extremists and siding with Iran. Qatar denies the charges.
“The real economy is still suffering from the regional developments last year,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Despite the economic pressures on Qatar, economists have highlighted the country’s large financial reserves, including its $300 billion sovereign-wealth fund. The country is the world’s largest exporter of liquefied natural gas, and its central bank and sovereign fund injected billions of dollars into the economy to contain the fallout of the political standoff.
But Qatar, which must import most of its food and other basic supplies, still faces higher import costs as it had to establish new commercial routes via Oman and Iran since the diplomatic rift erupted. Domestic banks initially experienced $30 billion in capital outflows.
At the same time, Qatar is proceeding with its $200 billion spending spree to prepare the country for the World Cup football tournament it is hosting in 2022. That infrastructure upgrade includes building at least eight new sports stadiums and further developing a metro and rail system.
U.S. officials are trying to broker an end to the impasse between Qatar and the Saudi bloc. President Donald Trump this week welcomed Qatar’s emir Sheikh Tamim bin Hamid Al-Thani to the White House.
“We’re working on unity in that part of the Middle East, and I think it’s working out very well,” said Mr. Trump.
Qatar went ahead with its bond sale, despite rising tensions in the Middle East. The Trump administration has threatened missile strikes against Syria following President Bashar al-Assad’s alleged chemical-weapons attack on a rebel area, while Yemeni militants fired missiles into Saudi Arabia on Wednesday.
Qatar, rated at AA by Standard & Poor’s, is issuing paper with 5-, 10- and 30-year maturities. Bookrunners on the deal included Barclays , Credit Suisse and Deutsche Bank , three European banks with Qatari connections.
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