(MENAFN- Khaleej Times)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. Sukuk issuances 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. IPO activity 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 billion) 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. The offering which closed in June was oversubscribed receiving significant levels of interest from investors. Year-on-year comparison showed that the GCC region raised 28 per cent more in IPOs during second quarter despite issuing less number of offerings (four in Q2 2015 compared to 7 in similar 2014 quarter) indicating improved company valuations. In terms of activity in the first half of 2015 the region witnessed a total of five offerings to raise total proceeds of $1.34 billion compared to a total of nine offerings raising total proceeds of $1.85 billion in same period last year. It reflected a 28 per cent decrease in total proceeds raised and a 44 per cent decrease in the number of offerings. However the average offering value in first half of 2015 was 30 per cent higher than the average offering value in same period of 2014. "Despite concerns over regional instability we saw several companies come to market this quarter that had been in the IPO pipeline. The amounts raised demonstrated that there is still equity investor appetite to invest in the right company. We would expect to see this trend continue once the market reopens after the summer period as other pipeline companies come to market" Drake said. He said it is perhaps too early to predict how the opening of the Saudi market to foreign investors will impact the number of IPOs. "We would expect the number of IPOs will increase over time as foreign investors gain confidence in the Saudi market." "In the UAE we saw a change to the Commercial Company Law allowing the minimum free float percentage be reduced from 55 per cent to 30 per cent. This change was in part to support the IPO market although we are yet to see the impact of this change filtering through to new market issuances" Drake added. Global IPO money raised stood at $65 billion through 390 deals in second quarter of 2015 compared to $77 billion through 325 deals in same quarter last year. Global money raised via follow-ons stood at $220.5 billion through 984 deals in April-June quarter this year compared to $195.1 billion via 829 deals in same period last year. Asia-Pacific was the leading region in terms of IPO activity in second quarter accounting for 55 per cent (213) of the total number of deals and 42 per cent ($27.3 billion) of global money raised via IPOs. The region also became the leading market in 2015 year-to-date with 55 per cent (351) of the number of global IPOs in the first half of the year and 38 per cent ($41 billion) of money raised. The IPO frenzy in China caused by market reforms and favourable monetary policy was one of the key drivers behind Asia-Pacific's success according to PwC.-
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