Companies are rushing to sell bonds and sukuk to investors as worries over the deteriorating global economy convince them it is better to go to markets now than risk being shut out in a few months.
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Abu Dhabi National Energy Company, also known as Taqa, began a roadshow with investors last week ahead of a potential bond sale, while Majid Al Futtaim (MAF) Holding and Al Hilal Bank are also laying the groundwork for sukuk sales.
The sudden impetus comes at the end of a turbulent year for bond sales. A number of planned bond issuances have been scaled back or postponed this year as the double whammy of the Arab Spring, and the euro-zone debt crisis sapped demand for Middle Eastern credit.
But the realisation the end of the year is approaching is concentrating minds and convincing companies to go to market, said one Dubai banker, who asked not to be identified.
"It's a cat and mouse game," the banker said. "Borrowers have to issue, and investors have cash on the sidelines. But it's a very nervous market."
With European banks deleveraging in an effort to protect themselves against the looming threat of a Greek sovereign default, analysts warn fresh lending is becoming scarce.
Deutsche Bank, Germany's biggest bank, is advising clients in the region to tap unconventional sources of funding, such as export credit agencies and development funds, said Henry Azzam, the chairman for the Middle East and North Africa at the bank.
But refinancing would prove challenging for many companies, with only a small window of opportunity to launch bonds, he added.
"The message we're telling clients who are looking to refinance is: it is going to be more challenging, you need to start preparing for it early on, it may take longer, it may cost you slightly more, so be careful," he said.
Despite the dark outlook for credit markets as the euro-zone sovereign debt crisis wears on and budget cuts in the US take hold, issuers are finding it is better to attempt bond sales now than risk bleaker conditions later, said Debashis Dey, the regional head of capital markets at Clifford Chance, a law firm.
"To the extent that people have hoped the markets would get better, that hasn't been the case so far. Some people have tried to make their best guess as to when to go into the market," he said.
"In some cases, even if they were told this isn't the best time to go into the market, they've been proven wrong subsequently."
The rush to market seen this month follows a bond sale by International Petroleum Investment Company (Ipic), a government-owned strategic investment company that sold US$3.75 billion (Dh13.77bn) of bonds last month and effectively reopened credit markets.
Investors treat bonds issued by government-owned companies such as Ipic as a benchmark, allowing other companies to price their bonds and approach the market more readily.
Taqa began meetings with investors last week as it offered to buy back $1.5bn in bonds and mulled another debt sale.
The energy company has submitted a tender to bondholders for $1.5bn worth of bonds maturing in October next year. The offer was in anticipation of an upcoming bond issuance, said a spokeswoman for the company.
"If we launch a new bond we'll have excess cash on our balance sheet, and the best use of that is to buy back our bonds," said Tanis Thacker, adding the new issuance was subject to market conditions remaining favourable.
Abu Dhabi Islamic Bank and Abu Dhabi Commercial Bank have successfully sold $500 million of sukuk this month, with both banks tapping Islamic credit markets for funding as the euro zone's crisis rattles conventional bond markets.
With regulations on banks tightening in the US and Europe, companies are looking elsewhere for fresh capital, said Daniele Vecchi, the head of treasury at MAF Holding. "Credit will be scarce and capital will be scarce for corporates," Mr Vecchi said. "The debt hangover is going to last not for the next six months or the next year, but for several years."
MAF Holding, the Dubai conglomerate that operates Mall of the Emirates and Carrefour, is also preparing for a sukuk sale.
Growing numbers of sukuk sales are expected to swell bank balance sheets, with Islamic banking assets worldwide set to increase to $1.1 trillion next year, according to a new report from Ernst and Young. That would represent a 33 per cent increase from $826bn last year.
The report added Islamic banking assets in the Middle East and North Africa were expected to more than double from last year to $990bn by 2015, as new countries granted licences for Islamic banks.
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