Saudi borrowers fuel MENA syndicated loan boom

Saudi Arabia accounted for more than a third of regional syndicated loans issued last year as corporate borrowers from shippers to builders tapped debt. (Shutterstock)
Updated 10 January 2019
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Saudi borrowers fuel MENA syndicated loan boom

  • Corporate bank borrowing across region hits record $127.2 billion last year
  • Saudi Arabia led a regional surge in syndicated loans last year that hit a record $127.2 billion across the Middle East and North Africa (MENA)

Newly published league tables from Bloomberg show that regional loans increased by more than half last year, surpassing the previous record set in 2007.
Saudi borrowers topped the league with more than a third of the market, while the UAE accounted for more than a quarter of the total and Oman almost 10 percent.
A weak oil price, falling property values and emerging market uncertainty rattled regional debt markets in 2018, while rising US interest rates put some borrowers under pressure.
However, some investors have seen the downturn as an opportunity to invest in Gulf corporate and sovereign debt.
Franklin Templeton, which has about $683 billion in assets under management, boosted exposure of its $350 million Gulf Cooperation Council (GCC) bond strategy to regional corporates by roughly 20 percent this year to 72 percent, Reuters reported
“Valuations are much better than they were 12-18 months ago. Pressure in some industries has led to a sell off, and the weaker the name, the easier it is for stress to build up fairly quickly, but this creates opportunity,” Dino Kronfol, its chief investment officer of global sukuk and MENA fixed income, told the newswire.
The regional economic downturn has meant that many corporates have started to restructure their borrowings, especially in the industries that have been hardest hit by the slowdown, such as construction and real estate.
The Bloomberg data reveals that while syndicated loans surged last year, bonds and sukuk registered a decline of 12.8 percent to $86.5 billion.
This was the second-highest amount on record, with the highest tally recorded in 2017, Bloomberg said.
UAE-based bond issuers had the biggest slice of the regional pie, followed by Qatar and Saudi Arabia.
While First Abu Dhabi Bank was the top regional loans bookrunner in 2018, Standard Chartered was the top underwriter in the bond and sukuk market across the Middle East and North Africa.
Bloomberg said that global Islamic financing jumped by almost 15 percent last year with some $32.95 billion in deals. Dubai Islamic Bank was the top underwriter in the sector.


Time to tear down Mideast trade barriers, Davos panel hears

Updated 23 January 2019
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Time to tear down Mideast trade barriers, Davos panel hears

  • Mohammad Al-Tuwaijri, Saudi minister of economy and planning, said a move to ease movement of traffic across the border could be followed elsewhere
  • Majid Al Futtaim CEO Alain Bejjani: Now there’s this seriousness between Saudi Arabia and the UAE, I hope it gets to frictionless trade

DAVOS: Amid global trade wars and the rise of protectionism, Middle East economic and business leaders on Tuesday issued a clarion call for the exact opposite: To ease customs restrictions in the region.
A panel at Davos heard how an agreement between Saudi Arabia and the UAE to boost cooperation — including the reduction of obstacles to trade across the shared border — could be a blueprint for the wider region.
Mohammad Al-Tuwaijri, Saudi minister of economy and planning, said a move to ease movement of traffic across the border — partly through the use of technology — could be followed elsewhere. “We want to establish a reference for others to follow,” he said.
Alain Bejjani, CEO of retail and leisure group Majid Al Futtaim, said “frictionless trade” would give the region a boost.
“Now there’s this seriousness between Saudi Arabia and the UAE, I hope it gets to frictionless trade,” he told Arab News on the sidelines of the Davos forum.
Bejjani declined to say whether that would involve a customs union, a common market or a common currency. Given the imposition of trade tariffs between the US and China, and the rise of Brexit, globalization — something espoused by many Davos delegates — is seen as on the wane.
But Bejjani said breaking down barriers in the Middle East could help it better compete with Western Europe and the US.
“For the past almost century now… we’ve been ingeniously working on making sure we put barriers across the Arab world. The reality is we have a market that’s as big as most of the largest markets in the world… if we’re smart enough to work together,” he told the Davos panel.
Khalid Al-Rumaihi, chief executive of the Bahrain Economic Development Board, agreed that Saudi-UAE cooperation was “a great template” for others to follow.
Aside from “opening up” Middle East markets, Al-Rumaihi said harmonizing regulation in the region would also be beneficial to businesses and entrepreneurs.
“If the rules are changing in each country, if they’re not harmonized, it’s very difficult… for an entrepreneur (to understand) the regulatory environment. So they don’t scale very quickly, and that’s something we need to solve,” he said. Talk of freer trade within the Middle East is especially relevant when it comes to the Palestinian territories, which are subject to Israeli occupation and blockade.
Palestinian Prime Minister Rami Hamdallah said freer movement and a reduction of duties would help the economy grow.
“We need to see our products being waived (of) customs,” he said. “We need mobility — we’re under occupation.”