Gulf states to raise $50bn in bonds this year

by Richard Kilner

Story link: Gulf states to raise $50bn in bonds this year

Moody’s Investors Service has stated that the Gulf states have the potential to raise $50bn over the course of the next year and a half, regardless of the turbulent credit situation.

The Gulf market is becoming more diverse and liquid, and the forthcoming year is thought to be key for the development of corporate debt in the region.

Continuing huge expansion of infrastructure combined with financing pressures will drive demand for bonds, according to Moody’s Dubai senior credit officer, Philipp Lotter.

Last year saw a record level of bond issuance, up 62% from 2006 to $23.7bn in 2007. $11.7bn was in sukuk.

The number of corporates involved in the credit markets also rose substantially, from 13 in 2006 to 18 in 2007. In addition, the predominant position of a handful of issuers in 2006 (where the almost 75% of the market was made up of three issuers) was changed so that in 2007 the same issuers comprised just 41% of the market.

The UAE retained its position as the driving force of the Gulf region, where 65% of issuance occurred, though other regional states have also grown recently.

Moody’s believes that although the international credit market remains turbulent, the Gulf region enjoys a strong position due to its infrastructure expansion plans.

This year should see a big rise in the issuance of bonds, according to Moody’s, as firms seek to finance infrastructure developments and refinance debt.

More than half of the issuance in 2007 was used for internal infrastructure, with the remainder set aside for M&A and real estate.