'GCC has $60b refinancing requirement in 2011'

Dubai: The Gulf region has more than $60 billion (Dh220 billion) debt maturing in 2011 and in the absence of liquidity in the bank market, companies will need to seek long term funding through capital markets, said Simon Penney chief executive officer for the Middle East and Africa at Royal Bank of Scotland Group.

Addressing the ACT Middle East conference on ‘Treasury, Risk and Finance Professionals' in Dubai yesterday Penney said the corporate sector in the region needs to change their funding mix in the context of the changed liquidity situation in the bank financing market.

"Companies need to diversify their funding mix. Banks no longer have the liquidity to refinance the kind of debts nearing maturity. This gap has to be filled by the capital market," said Penney.

Currently about 92 per cent of the total outstanding debt from the region comes from the short term market compared with 71 per cent in the US. Penney said there is huge potential for funding and refinancing in the region through the bond market.

Liquidity

"There is sufficient liquidity in the long term funding market and the experience of recent bond issues from the region shows that there is huge demand for Gulf bonds in the international market," he said.

A recent $1.5 billion bond issue from Qatar Telecommunications Company attracted more than $10 billion worth demand while Emaar Properties' recent $500 million convertible bond issue had a book size of $2 billion.

While the funding through debt capital market offers longer tenors and lesser liquidity risks compared to short term funding from the syndication market, it demands greater transparency from the borrowers.