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MENA bond market set to exceed $40b in 2011

By Abdul Basit DUBAI - The primary bond market in the Middle East and North Africa, or MENA, is expected to cross last year's mark of $40 billion in 2011 because of increased borrowing requirements and improved pricing, a senior Deutsche Bank executive said on Tuesday.

Salman Al Khalifa, the bank's global head of markets for the region, said there had been 17 issues so far this year worth $10 billion, with Deutsche Bank on five of them.

"By the end of the year I expect total issuance from the MENA region to be at or above last year's levels. "This is due to the backlog that exists due to the Arab Spring, increased borrowing requirements from the region and improved pricing," Al Khalifa told reporters at a roundtable event in Dubai.

Dubai met investors in London on Tuesday ahead of a planned sale of 10-year bonds that will have a put option after five years, according to three bankers familiar with the deal.

"International bonds from the region were subdued for a certain period of time due to the Arab Spring," Al Khalifa said. "That doesn't take away from the general trend that people's financing requirements and needs around borrowing are continuing to increase due to rising economic activity."

Among the latest companies seeking to tap debt markets is Abu Dhabi-based Dolphin Energy , in which Occidental Petroleum Corporation and Total SA are shareholders.

Dolphin, which imports gas from Qatar to the UAE, has mandated BNP Paribas , Royal Bank of Scotland , Societe Generale, The Bank of Tokyo-Mitsubishi , and Abu Dhabi Commercial Bank on its planned bond issue that aims to raise more than $1 billion to refinance existing debt.

Also in the market is the Dubai government, which is meeting investors this week ahead of a planned dollar-denominated bond issue. Dubai's department of finance has appointed UBS, RBS and Emirates NBD for the planned bond issue under its EMTN programme.

The plans follow the launch of a five-year, $1 billion bond issue by Dubai's flagship carrier Emirates earlier in June, which received high levels of investor interest in a sign that confidence in Dubai's economic fundamentals is slowly returning.

Abu Dhabi government-owned International Petroleum Investment Co on Sunday announced plans for a non-deal investor update roadshow.

Al Khalifa said Deutsche Bank has a healthy pipeline of bond mandates before September and is seeing the backlog of issuers coming to the market. The mandates are mainly from top tier companies, governments and government-related entities in the UAE, Saudi Arabia and Qatar, he said.

Deutsche Bank has been the second main adviser on bond sales in the MENA region so far this year after HSBC Bank Plc. Separately, HSBC Holdings Plc's Islamic unit expects to have more mandates for bond sales by year-end than in 2007, when global sukuk sales reached a record.

"We have a healthy pipeline of mandates for this year," Mohammed Dawood, head of debt capital markets at HSBC Amanah , told reporters in Dubai on Tuesday. "We expect this year to beat last year's number, and to beat the issues we managed in 2007." The bank forecasts issuers new to Shariah-compliant finance from Europe, the Middle East and Asia will sell sukuk this year.

Global Islamic bond sales climbed 24 per cent so far this year to $7.8 billion from the same period last year as borrowing costs declined, according Bloomberg data.

Issuance reached a record $31 billion in 2007. HSBC is the world's leading sukuk manager by value in 2011, with 12 issues amounting to $2.1 billion, according to data compiled by Bloomberg.

© Khaleej Times 2011