Two local entities plan debt offerings

Buoyed by the success of the Emirates airline group's bond issue earlier this year, two local entities are planning their own debt offerings, with one being imminent, banking sources confirmed.

Of the two, one has been put on hold due to the current international situation, but the other for about Dh360-Dh550 million is likely to go ahead before end-year or early next year, a senior banker told Gulf News.

"It is a private dirham-denominated issue that is likely to go ahead around end-December or early next year, should talks fructify. We are in advanced negotiations," he said. But the bigger bond issue by another local entity has been put on hold because of the international situation. "Since it is a bigger issue, they are looking for the right time," he said.

National Bank of Abu Dhabi (NBAD) is lead manager, with the involvement of some local and international banks.

A more active bond market can be had only if local companies looking to tap debt capital become more transparent, pointed out Anis Al Jallaf, managing director and chief executive of Emirates Bank Group, at a recent conference.

"For a debt market to develop, there should be transparency on the part of companies interested in it. Companies should not be working behind closed doors - they should have glass doors," he felt. "Even now, there are companies which do not offer their balance sheets to their banks.

"With the lower interest rates - the lowest in 30 years - there is a good opportunity for local companies to seriously consider bond issues." So far, Emirates airline is the only local company to have come out with a debt offering, with a Dh1.5 billion issue in July.

Another Abu Dhabi-based banker noted debt instruments such as bonds will be an important investment vehicle as more issues hit the market in coming months.

"Given the current international situation, bonds are the right way to attract local money invested overseas in other currencies. They will not only bring stability to the weak stock markets locally, but will also provide a new option to investors who (currently) look overseas for investment vehicles."

While Emirates airline was the pioneer in the domestic bond market, there have been two earlier bond issues by international companies.

The first was a Dh350 million bond issue by BMW U.S. Capital Corp in 1999, and was a resounding success that sold out in 48 hours. The second, a Dh400 million bond, was by the UK's Abbey National.