As investors around the world brace for continued uncertainty in 2019 that will test the steeliest of nerves, the outlook for debt markets in the Gulf Co-operation Council (GCC) region is a much brighter one, with the potential for strong risk adjusted returns.
Borrowers based in GCC countries are increasingly looking to new pools of liquidity in a bid to satisfy growing demand for longer-term funding. But deepening concerns around the implementation of VAT, rising interest rates and softening demand for emerging market assets continues to weigh on credit markets, according to feedback from borrowers at an exclusive Breakfast Briefing hosted by HSBC and Bonds & Loans at the 2018 Project, ECA and Structured Finance event in Dubai.
Leading UAE-based regional district cooling firm National Central Cooling Company PJSC – better known as Tabreed – launched its debut benchmark 7-year sukuk against the backdrop of an active deal pipeline and adverse market conditions, securing competitive pricing and an oversubscription rate of 1.5X. The funding team’s decision to prioritise speed-to-market, flexibility, and investor visibility by working with a leading global exchange like London Stock Exchange were central to the transaction’s resounding success.
At a recent meeting of the Federal Supreme Council in Abu Dhabi, UAE leaders discussed plans to strengthen Emirati unity, calling for greater integration and cooperation in pursuit of ‘national development’. This pronouncement is one of the first public indicators of a broader trend towards federalisation in the Gulf nation, where political convergence has been pushed on by growing domestic tensions.
Since its establishment in 1960, OPEC has seen its proportion of global oil production gradually decline. With the formation of OPEC+ in 2016, which saw OPEC agree to cut production alongside a number of other producers, and Qatar’s recent exit from the bloc, questions have been raised about the cartel’s waning influence – leading some to seriously consider what a world without OPEC would look like.
Omantel, Oman’s majority state-owned telecommunications company, last year completed a USD2.25bn acquisition of shares in Zain Group, a regional competitor. The deal was funded with a bridge loan that was later refinanced with a term loan and the largest corporate bond issued out of the country – a dual-tranche senior secured offering which attracted a wide group of investors from around the world, including Europe, Asia and the US. We speak with Narayanan Seshan, General Manager of the Treasury at Omantel, about this deal and other “funky” financing structures emerging in the region.
The GCC is rarely known for doing anything in half-measures, and infrastructure projects – which have grown in number and size in recent years – are no exception.
Mohammed Khnifer, Senior Associate, Debt Capital Markets at the Islamic Corporation for the Development of the Private Sector (ICD), spoke to Bonds & Loans about Saudi Arabia’s real estate sector, the upcoming inclusion of Saudi debt in the JP Morgan indices, and the development of regulation within the country.
The outlook for GCC credit remains buoyant through the remainder of the year despite a brief lull through the summer months. Still, deeper and more frequent questions about the structural challenges faced by many of the GCC economies suggest more uncertainty lies ahead in the longer term, according to bankers, borrowers, investors and economists who spoke with Bonds & Loans on a recent research trip to the region.
This year’s Bonds, Loans & Sukuk Middle East Awards saw no shortage of firsts as the regions borrowers and finance professionals pushed the boundaries of the possible through new structures and techniques in a range of transactions.
- Beyond 2030: Diversification, Corporate Transformation and Funding in the UAE
- Saudi Debt Surge Cuts Through Broader EM Woes – But for How Long?
- Baladna CEO: ‘Blockade a boon for Qatar’s dairy sector’
- ADNOC CIO on Capital Efficiency, Investment Strategy and Downstream Growth
- Franklin Templeton Sees Strong Project Finance Pipeline in GCC