UAE key player in Q2 GCC corporate bond issuance
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.