Back in the ring interview

03 September 2004
The rising headcount in Barclays Capital's Dubai office is an indicator of the investment bank's focus on the Gulf. This time, the core regional strategy of Barclays Capital reflects its current global strategy, which aims to reap better returns by adopting a wide focus - taking in areas such as risk management, debt financing (particularly in the power and aviation sectors) and securities financing.

'We see the greatest opportunities arising in the power, real estate, oil and gas, aircraft and government export finance markets,' says Cyrus Ardalan, vice-chairman of Barclays Capital. 'We see growth potential for a variety of securities products: Eurobonds, local currency bonds and the sukuk market.'

The surge in debt capital market (DCM)-related projects has been pronounced across the region over the last 12 months and Barclays aims to develop a strong presence. If it succeeds it will neatly complement its presence in the regional project finance market. After what seemed like a brief hiatus following the Compound Leasing Company deal in Saudi Arabia - and a change in personnel, which saw the likes of Jason Peers and Vince Cook among others leave the bank - Barclays has demonstrated its returning appetite on multiple fronts.

In recent months it has joined the lead arranging group for the $3,600 million conventional loan for Qatargas Liquefied Gas Company II (Qatargas II), participated in a $1,360 million bridge loan for Dolphin Energy and lead arranged the $400 million refinancing for Emirates CMS Power Company. On the DCM front, it co-managed the $665 million Ras Laffan Liquefied Natural Gas Company (RasGas) bond and is lead managing the imminent $200 million sukuk for Abu Dhabi Islamic Bank. The new team in Dubai - headed by Nicholas Hegarty - is being kept busy.

'Barclays never left the region but we focused our activity for a while on the commercial banking business,' says Ardalan.

Despite the recent forays into the nascent sukuk market, Ardalan does not believe Barclays would benefit from establishing a free-standing sharia-compliant subsidiary, as Citigroup and HSBC, among others, have done. 'You don't need an Islamic window - it just puts you in competition with local banks,' he says. 'Although we have experts with Islamic banking knowledge and we work with local institutions, we feel it is better to stay a conventional banking business and establish credibility from an ability to structure successful transactions.'

But the real focus will be on the conventional bond market, be they corporate or project-backed. 'International dollar-denominated bonds will continue to be listed mainly in Europe, particularly Luxembourg, with only a few remaining local,' says Ardalan. 'Barclays is keen to use its expertise in this market.'

Ardalan points to Basel II as a driving factor in the development of a regional securities market. 'Basel will force both banks and clients to become more dynamic in their approach to managing balance sheets,' he says.

Ardalan is unsure in predicting where in the Gulf the crystallisation of debt capital markets will take place. 'Saudi Arabia is the biggest market with the size and potential needs in terms of population increases and infrastructure requirements, but it faces challenging issues. Iran is huge but has major political issues, especially with the US. The Gulf is a smaller and more piecemeal market. We see opportunities in the UAE and in particular sectors there - notably infrastructure and real estate.'

But in the shorter term, there is no shortage of opportunities on the horizon.

Laura Haynes

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