UAE key player in Q2 GCC cor­po­rate bond is­suance

The Pak Banker - - BUSINESS -

The GCC bond and sukuk mar­kets ac­tiv­ity re­mained rel­a­tively sound in the sec­ond quar­ter de­spite po­lit­i­cal un­cer­tainty in some parts of the re­gion, the debt cri­sis in Greece and volatil­ity in oil prices.

Price­wa­ter­house­Coop­ers, or PwC, said the UAE emerged as a key player in terms of cor­po­rate bond is­suances dur­ing the April-June 2015 quar­ter as the mar­ket wit­nessed first time is­suers from the likes of Bank of Shar­jah and Noor Bank amongst oth­ers, as mar­ket con­di­tions be­come more favourable.

Bank of Shar­jah is­sued its first $500 mil­lion bond car­ry­ing a coupon of 3.374 per cent listed on an in­ter­na­tional mar­ket. This also marked the first con­ven­tional bond is­sued by the emi­rate of Shar­jah.

Na­tional Bank of Abu Dhabi is­sued a $750 mil­lion ad­di­tional tier 1 per­pet­ual bond at a coupon of 5.25 per cent while DP World's $500 mil­lion five-year bond hit the mar­ket at a lower coupon rate of 3.25 per cent. In terms of sov­er­eign is­suances, the Cen­tral Bank of Kuwait was an ac­tive player in sec­ond quar­ter as it is­sued nine trea­sury bills each worth $165 mil­lion car­ry­ing a coupon of one per cent or 1.25 per cent.

It also a is­sued to­tal 10 dif­fer­ent gov­ern­ment bonds worth $4.877 bil­lion car­ry­ing a coupon rate as low as 0.75 per cent. Two gov­ern­ment bonds each worth $579 mil­lion were is­sued at a coupon of 0.875 per cent or 0.75 per cent, five gov­ern­ment bonds each worth $496 car­ry­ing a coupon of 0.875 per cent or 0.75 per cent and three gov­ern­ment bonds each worth $413 mil­lion hit the mar­ket at a coupon of 0.75 per cent.

The sukuk mar­ket in the sec­ond quar­ter wit­nessed a prom­i­nent cor­po­rate is­suance from Saudi based en­ti­ties such as a $1.07 bil­lion sukuk by Riyad Bank car­ry­ing a coupon of 1.99 per cent and a $400 mil­lion sukuk by Saudi Bri­tish Bank car­ry­ing a coupon 2.143 per cent.

In the UAE, Dubai Is­lamic Bank is­sued a $750 mil­lion sukuk car­ry­ing a coupon of 2.921 per cent and Noor Bank is­sued its de­but $500 mil­lion sukuk car­ry­ing a coupon of 2.788 per cent. The Cen­tral Bank of Bahrain was an ac­tive sov­er­eign is­suer in April-June quar­ter with three sukuks (Al Salam is­suances) -each worth $114 mil­lion car­ry­ing a coupon of 1.2 per cent. It also is­sued three Sukuk Al Ijara each worth $69 mil­lion car­ry­ing a coupon of 1.25 per cent.

"Com­pa­nies are still look­ing for new fi­nanc­ing or re­fi­nanc­ing of ex­ist­ing ar­range­ments and there­fore, we should ex­pect to see is­suers go­ing to mar­ket from Septem­ber once in­vestors re­turn from the sum­mer break," said Steve Drake, head of PwC's Cap­i­tal Mar­kets and Ac­count­ing Ad­vi­sory Ser­vices team in the Mid­dle East re­gion. He said the risks sur­round­ing Greece and the un­cer­tainty around US in­ter­est rates to­gether with the Holy Month of Ramadan and sum­mer pe­riod are amongst some of the fac­tors that may have a damp­en­ing im­pact on the debt mar­ket over the next cou­ple of months.

"The GCC's solid fun­da­men­tals have proven ad­van­ta­geous to the re­gion in the past," he said. Ac­cord­ing to the PwC's cap­i­tal mar­kets and ac­count­ing ad­vi­sory ser­vices team, ini­tial public of­fer­ings (IPOs) per­for­mance in the Gulf Co­op­er­a­tion Coun­cil, or GCC, showed signs of re­cov­ery in terms of the num­ber of of­fer­ings and to­tal money raised in the sec­ond quar­ter of 2015.

Saudi Ara­bia re­mained the most ac­tive IPO mar­ket in the re­gion so far as it ac­counted for 75 per cent of the to­tal num­ber of IPOs and 87 per cent ($1 bil- lion) of to­tal money raised in April-June quar­ter· A to­tal of four IPOs were wit­nessed in the GCC re­gion in sec­ond quar­ter with to­tal pro­ceeds of $1.15 bil­lion com­pared to only one IPO in the pre­vi­ous quar­ter of the year rais­ing $185.4 mil­lion.

Saudi Ground Ser­vices Com­pany is­sued the largest IPO in the quar­ter to raise a to­tal of $751.9 mil­lion. Mid­dle East Pa­per Com­pany and Saudi Com­pany for Hard­ware, also listed on Saudi stock mar­ket Tadawul, raised $120 mil­lion and $134.4 mil­lion, re­spec­tively. Phoenix Power, owner of Oman's largest power plant in op­er­a­tion, be­came the first Omani firm at the Muscat Se­cu­ri­ties Mar­ket to is­sue the IPO this year to raise $146.2 mil­lion in the quar­ter.

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