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Mon 31 Oct 2011 07:21 PM

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GCC firms delaying issues may raise refinancing risk

Standard & Poor's questions some companies' reliance on short-term bank debt

GCC firms delaying issues may raise refinancing risk
Delays by companies in the GCC to tap capital markets may exaggerate refinancing risks, S&P said

Delays by companies in the Gulf Cooperation Council to tap capital markets may exaggerate refinancing risks, Standard & Poor’s Ratings Services said on Monday.

“Higher rated issuers will have no problem rolling over debt, but those farther down the rating scale may find it more difficult to do so,” S&P said in a report.

“Overreliance on short-term bank debt also exposes issuers to refinancing risks down the line.”

Global economic conditions for issuing bonds showed signs of recovery this month after a turbulent August, S&P said. Increased risk aversion by investors and concern about the negative implications of slowing global economic growth were behind the swings, according to the report.

Companies in the six-member GCC are recovering after the worst global recession since the 1930s curbed lending and bond issuances and forced a decline in the regional property market.

The UAE will dominate sovereign-bond offerings among GCC members this year as government sales in the region total $5bn, Standard Chartered said in March.

Government-related entities in the region and companies that bear “significant refinancing risks in 2012” have seen mostly negative outlooks, S&P said.

There is a “return to stability” in the GCC property markets, it added.

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