Gulf conventional bond issues double to $11b

The issuance of conventional bonds in the Gulf has increased more than tenfold in the last three years from just $964 million in 2003/04.

The phenomenal growth in the use of conventional bonds in the Gulf has largely been overshadowed by the rise of Islamic bonds which has nearly trebled in the same period (to year end June 30, 2007) to reach $ 14.5 billion up from $5.1billion in the previous year.

Sukuk issuance was 57 per cent of all corporate bond issuance in the Gulf over the last year although that is below the 80/20 share that it was running at in the summer of 2006.

Explains Adrian Creed, Partner of Trowers & Hamlins: “Gulf corporates are not solely committed to sukuk. They will use conventional bonds or rights issues when they see fit. For example, a recent fundraising by DP World saw them issue a US $1.5 billion 10 year sukuk and a $1.75 billion 30 year conventional bond.”

“Pragmatism overrides the kudos of issuing a sukuk. But it is clear that bonds are now a well established tool in the GCC.”

According to the research, the continued shift towards corporate financing through longer term bonds and sukuk and away from just bank loans and short term paper is a healthy indicator for an emerging market.

It added that the average tenor (time to maturity) of sukuk issued over the last year was six years, up from an average of 4.8 years in the previous twelve months issuance.