Gulf corporates eye bond issues for refinancing and expansion

12/05/2011 00:00 AST

Gulf Arab companies have lagged state-linked firms in issuing bonds, held back by the credit crunch and regional strife, but with about $60bn in refinancing coming up by 2012, more could soon hit the road to lure global investors.

Corporates that tap debt markets can expect to meet healthy demand, due in part to the dearth of issuance compared with government-related firms and the prospect of high coupon rates, investors say.

Portfolio managers holding bonds issued by Kuwait Projects Co (Kipco) last July have already made a cash return of about 11% on the investment. Kipco is the biggest investment firm in Kuwait yet it offered its bond at an alluring 9.5%.

But in return corporates will have to be ready to open their books to scrutiny and cough up a hefty regional risk premium.

“There’s more refinancing needs in this region than anywhere else during 2011. We would have expected a lot more issuance out of the region, but that hasn’t happened yet,” said Steve Cook, head of Emerging Markets Corporate Bonds at PineBridge Investments, the asset management arm of AIG.

“Our understanding is that the pipeline of potential primary deals is large. It’s just a question of timing,” he added.

“If they (issuers) are realistic on pricing and provide a new-issue premium then the deals will likely see strong demand.”

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