DUBAI, 10 October 2007 — Middle Eastern companies, led by those in Saudi Arabia, sold $4.8 billion of stock in initial public offerings in the first-half compared with $8 billion in all of last year, accountants Ernst & Young said yesterday.
The $1.8 billion Saudi Kayan Petrochemical Co IPO was the biggest, followed by Dubai Islamic Bank’s $883 million sale of stock in property unit Deyaar, Ernst & Young said in a statement.
In all, 20 companies, including 11 in Saudi Arabia, sold stocks in IPOs in the three months to June 30, raising $3.9 billion, the accountancy firm said. Saudi companies raised $2.56 billion, it said. It did not give comparative data for the first-half of last year.
“This reflected the growing capital base and confidence in the regional capital markets,” Azhar Zafar, head of mergers and acquisitions services, is quoted as saying the statement.
Demand in the Middle Eastern IPO market, centered around the six Gulf Arab oil exporters, crumbled in last year as share prices collapsed across the region.
The average oversubscription rate for Gulf IPOs fell to 6.5 times in the first six months of this year from 60 times in the year-earlier period and 73 times in 2005, according to UAE private equity firm Gulf Capital.
Meanwhile, Kuwait-based Abyaar Real Estate Development Co is considering selling as much as $1 billion of Islamic bonds next year to finance projects including a Dubai development, the company’s vice president said yesterday.
Abyaar plans to raise $700 million through Islamic bonds in January for the Dubai project. It is also considering selling $300 million of bonds later that year for a separate project, Marzooq Al-Rashdan told Reuters by telephone from Kuwait.
The five-year Islamic bonds, or sukuk, planned for January will be structured as murabaha contracts and Merrill Lynch are advising on the sale, he said, adding it was too early for pricing details.
In murabaha deals, a financier, such as a bank, buys a commodity and sells it to the customer at a higher price, complying with Islam’s ban on lending on interest.
The bonds would finance a residential and commercial real estate project in Dubai, Rashdan said.
The company is also planning to expand operations into Saudi Arabia and Qatar, he said.
Abyaar’s sukuk sale is one of only two benchmark size bonds to be announced in the last two months. Other borrowers have shelved sales in response to a global credit crisis sparked by defaults on US home loans. Benchmark size bonds are worth at least $500 million.
On Sunday, United Arab Emirates-based Dana Gas said it had sold $875 million of sukuk, after delaying the sale and reducing its size because of turmoil in credit markets.
Bankers said that sale was probably a private placement to avoid a public sale in a risk-averse market.
Sukuk are typically backed by physical assets that pay a dividend or rent to bondholders rather than interest.
