Bond market set for revival
The pace of Gulf bond issues is expected to accelerate in September, as companies push ahead with deals that have been postponed because of uncertainty in the global credit market.
Despite healthy domestic demand in some markets such as Saudi Arabia, companies seeking international backers have found it more difficult to issue bonds.
In July, at least three GCC institutions including Abu Dhabi's First Gulf Bank (FGB), Bahrain's Ithmaar Bank and Saudi Arabia's Dallah al-Baraka postponed issuing debt because of a drop in international investor confidence following the collapse of the sub-prime mortgage market in the US.
First Gulf Bank will relaunch the first issue from its $3,500 million euro-medium term note programme, which was deferred on 11 July, in the autumn. The initial pricing of the debt was high, at 40 basis points over the three-month London interbank offered rate (Libor).
'That is expensive for a bank with an A+ rating,' says an Abu Dhabi-based banker. 'They can get lower-priced borrowing.'
'Once the market stabilises, we will see a strong pipeline [of issues],' says Kaveh Ertefai, director of investment banking at UBS, financial adviser on Ithmaar's postponed $300 million debut sukuk (Islamic bond) issue.
Issuers in Saudi Arabia have had more success in finding investors. Saudi Basic Industries Corporation (Sabic) received Capital Market Authority approval on 22 July to increase its sukuk issue by SR 3,000 million ($800 million) to SR 8,000 million ($2,133 million) (MEED 20:7:07).
'The Saudi Arabian market is largely insulated and has domestic depth,' says Declan Hegarty, managing director of global markets at HSBC Bank Middle East.
'Anyone doing dollar borrowing is going to feel the effect more. For local currency, it is less of an issue.'
www.meed.com/companiesmarkets
The pace of Gulf bond issues is expected to accelerate in September, as companies push ahead with deals that have been postponed because of uncertainty in the global credit market.
Despite healthy domestic demand in some markets such as Saudi Arabia, companies seeking international backers have found it more difficult to issue bonds. In July, at least three GCC institutions including Abu Dhabi's First Gulf Bank (FGB), Bahrain's Ithmaar Bank and Saudi Arabia's Dallah al-Baraka postponed issuing debt because of a drop in international investor confidence following the collapse of the sub-prime mortgage market in the US. First Gulf Bank will relaunch the first issue from its $3,500 million euro-medium term note programme, which was deferred on 11 July, in the autumn. The initial pricing of the debt was high, at 40 basis points over the three-month London interbank offered rate (Libor). 'That is expensive for a bank with an A+ rating,' says an Abu Dhabi-based banker. 'They can get lower-priced borrowing.' 'Once the market stabilises, we will see a strong pipeline [of issues],' says Kaveh Ertefai, director of investment banking at UBS, financial adviser on Ithmaar's postponed $300 million debut sukuk (Islamic bond) issue. Issuers in Saudi Arabia have had more success in finding investors. Saudi Basic Industries Corporation (Sabic) received Capital Market Authority approval on 22 July to increase its sukuk issue by SR 3,000 million ($800 million) to SR 8,000 million ($2,133 million) (MEED 20:7:07). 'The Saudi Arabian market is largely insulated and has domestic depth,' says Declan Hegarty, managing director of global markets at HSBC Bank Middle East. 'Anyone doing dollar borrowing is going to feel the effect more. For local currency, it is less of an issue.' www.meed.com/companiesmarketsThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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