By Arif Sharif & Stefania Bianchi
Bonds will be sold from across the region, but will be dominated by the UAE.
Royal Bank of Scotland Group expects to manage $7 billion to $10 billion of Gulf Arab bond sales next quarter, which will be the best three months for debt offerings this year for the region, a bank official said.
The bonds will be sold by governments, state related companies, financial institutions and companies from “across the region, but dominated by the UAE,” Simon Penney, chief executive officer for the Middle East and Africa at RBS, the UK’s biggest government owned bank, said in an interview in Dubai on Sept 16.
The offerings will be from Abu Dhabi, Dubai and some of the country’s other emirates, he said.
Middle East debt capital market issues have been hurt this year because of the uncertainty surrounding global economic recovery and state owned Dubai World’s $24.9 billion debt restructuring.
The six Gulf Arab countries, comprising Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Oman, raised $16 billion so far from 30 bond issues this year compared with $22.2 billion from 34 deals in the same period a year ago, according to data compiled by Bloomberg.
Penney said: “The pipeline in the last quarter is better than any other quarter. And if you were to multiply that across the street you are going to see a better quarter, particularly in the debt space.”
Dubai World said Sept 10 that banks representing more than 99 percent of the value of its loans had agreed to its debt restructuring plan.
The cost to protect against a default by Dubai dropped to its lowest in more than four months since the announcement, falling 39.4 basis points to 419.26, according to data compiled by Bloomberg.
RBS is one of the main lenders to Dubai World and part of a seven member committee that negotiated the debt accord with the holding company.
Penney said: “The Dubai World resolution can only have a positive impact. You can now draw a line and move on, not just in the bond market but also in the lending market.”
RBS, based in Edinburgh, ranks fifth among Middle East bond sale managers this year behind HSBC Holdings, Deutsche Bank, Standard Chartered and Samba Financial Group, according to data compiled by Bloomberg.
The bank managed the $3.5 billion bond sale of Qatari Diar Finance in July and the $1 billion bond issue of Dubai Electricity & Water Authority in April.
Dubai’s government and companies have $15 billion to $20 billion of debt maturing in each of the next two years and will increasingly look to sell bonds to help repay loans as bank lending declined “significantly,” Penney said.
He added: “Just because Dubai World has been resolved, that is not the end of the story.”
RBS will concentrate on its investment banking, global cash management, trade finance and private banking businesses in the Middle East after announcing the sale of its UAE retail banking business to Abu Dhabi Commercial Bank in June, Penney said. The sale is expected to conclude Oct 1, he said. (Bloomberg)