With bond markets convulsing, syndicated loans - which fell out of favour because of low yields on offer from capital markets - are back in style.
But interest rates are expected to rise in 2015 following comments from the US Federal Reserve chairman, Ben Bernanke, spelling an end to the central bank's quantitative easing policy.
US 10-year treasury bonds sold off sharply following the announcement, with Dubai and Abu Dhabi bond yields also rising yesterday. Bond yields move in the opposite direction from price.
A prolonged period of falling yields for issuers of bonds and sukuk over the last few years had meant companies were able to tap capital markets with relative ease, said Karim Nassif, a credit analyst at Standard & Poor's.
"What we may be seeing is a situation now where because of treasury rates in the United States and potentially the impact on pricing in the region, bank financing may once again prove to be a compelling means of financing," he said.
The withdrawal of European banks as a result of troubles in their home markets was resulting in an opening for banks seeking to enter the region, Mr Nassif added.
Though borrowing costs for Middle Eastern companies and governments were likely to rise, there were alternatives to dollar-denominated bonds available that could mitigate rising interest rates, said Raza Agha, the chief economist at VTB Capital in London.
"Both Dubai and Abu Dhabi can further lower the cost of borrowing by issuing either euro-denominated paper, and/or sukuks which have done better in the recent sell-off," he said.
Sadara Chemical Company, a joint venture between Saudi Aramco and Dow Chemical, signed a financing deal on Sunday to raise US$10.5 billion as part of the construction of a massive $19.3bn petrochemical complex in Jubail. The deal also incorporated a $2bn sukuk launch.
It is the biggest such deal in what had been a lacklustre year for syndicated lending.
Banks have arranged $19.1bn of syndicated loans in the Middle East so far this year, compared to $26.3bn worth of bonds, according to data compiled by Bloomberg.
The stringent capital requirements known as Basel III also compelled banks to hold more capital against their bond portfolio, making fixed income less attractive to lenders.
Bond markets may still be an attractive choice for chief financial officers, said Mark Watts, the general manager of National Bank of Abu Dhabi Asset Management Group.
"You can look at the yields available in bond markets today and depending on the project you want to finance, you've got the option of syndicated loans or doing a bond," he said. "At the moment, secured five and 10-year funding with rates as low as they are still makes a very good deal."
Companies have little time to launch bonds before Ramadan begins in early July, a time when the business tends to slow down. But those that do issue within the next few weeks could still be received favourably by bond markets, he added.
Some riskier issuances, such as MAF Holding's proposed perpetual bond last month, were put on hold by the volatility on bond markets.
Syndicated loan deals are increasing in the meantime.
Investment Corporation of Dubai, which has traditionally shied away from public debt sales, closed a $2.55bn loan deal earlier this month.
"It all depends on which bank you talk to, and whether they've got the balance sheet to lend out," said Tim Plews, the head of Middle East financial services and markets at Clifford Chance.
"At present we're seeing a mixed approach - some organisations are thinking about mixing a bond with a loan to get financing."
ghunter@thenational.ae
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
The specs: 2018 Mitsubishi Eclipse Cross
Price, base / as tested: Dh101,140 / Dh113,800
Engine: Turbocharged 1.5-litre four-cylinder
Power: 148hp @ 5,500rpm
Torque: 250Nm @ 2,000rpm
Transmission: Eight-speed CVT
Fuel consumption, combined: 7.0L / 100km
A new relationship with the old country
Treaty of Friendship between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates
The United kingdom of Great Britain and Northern Ireland and the United Arab Emirates; Considering that the United Arab Emirates has assumed full responsibility as a sovereign and independent State; Determined that the long-standing and traditional relations of close friendship and cooperation between their peoples shall continue; Desiring to give expression to this intention in the form of a Treaty Friendship; Have agreed as follows:
ARTICLE 1 The relations between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates shall be governed by a spirit of close friendship. In recognition of this, the Contracting Parties, conscious of their common interest in the peace and stability of the region, shall: (a) consult together on matters of mutual concern in time of need; (b) settle all their disputes by peaceful means in conformity with the provisions of the Charter of the United Nations.
ARTICLE 2 The Contracting Parties shall encourage education, scientific and cultural cooperation between the two States in accordance with arrangements to be agreed. Such arrangements shall cover among other things: (a) the promotion of mutual understanding of their respective cultures, civilisations and languages, the promotion of contacts among professional bodies, universities and cultural institutions; (c) the encouragement of technical, scientific and cultural exchanges.
ARTICLE 3 The Contracting Parties shall maintain the close relationship already existing between them in the field of trade and commerce. Representatives of the Contracting Parties shall meet from time to time to consider means by which such relations can be further developed and strengthened, including the possibility of concluding treaties or agreements on matters of mutual concern.
ARTICLE 4 This Treaty shall enter into force on today’s date and shall remain in force for a period of ten years. Unless twelve months before the expiry of the said period of ten years either Contracting Party shall have given notice to the other of its intention to terminate the Treaty, this Treaty shall remain in force thereafter until the expiry of twelve months from the date on which notice of such intention is given.
IN WITNESS WHEREOF the undersigned have signed this Treaty.
DONE in duplicate at Dubai the second day of December 1971AD, corresponding to the fifteenth day of Shawwal 1391H, in the English and Arabic languages, both texts being equally authoritative.
Signed
Geoffrey Arthur Sheikh Zayed
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
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The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
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- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
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Engine: Four electric motors, one at each wheel
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Company profile
Name: Tharb
Started: December 2016
Founder: Eisa Alsubousi
Based: Abu Dhabi
Sector: Luxury leather goods
Initial investment: Dh150,000 from personal savings
The specs
Engine: 2.9-litre, V6 twin-turbo
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Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
ULTRA PROCESSED FOODS
- Carbonated drinks, sweet or savoury packaged snacks, confectionery, mass-produced packaged breads and buns
- Margarines and spreads; cookies, biscuits, pastries, cakes, and cake mixes, breakfast cereals, cereal and energy bars
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A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
