Shuaa strengthens restructuring arm to advise corporates looking to tap credit lines

Company will advise on funding through debt capital markets or through instruments such as junior and mezzanine debt

Dubai International Financial Centre. Kamco Research has forecast debt and sukuk issuance in the GCC this year could top last year's record of $140.8bn. AP Photo.

Shuaa Capital, the asset management and investment banking group, is strengthening its corporate restructuring arm to help firms struggling to access finance.

The company said its corporate restructuring business would address "liquidity issues and potential insolvency concerns faced by many businesses that have been impacted by the Covid-19 crisis" by providing access to new credit lines. It will advise companies looking to arrange funding through debt capital markets or through instruments such as junior and mezzanine debt or convertible bonds.

"We understand that businesses need access to both revenue and liquidity, especially as we prepare for the post Covid-19 world," said Jassim Alseddiqi, chief executive of Shuaa Capital. "By strengthening our corporate restructuring service, we are stepping up our support to the business community and preparing them to emerge safer and stronger from the current crisis.”

Shuaa Capital underwent a reverse takeover by Abu Dhabi Financial Group last year, creating a combined entity with over $14 billion (Dh51.4bn) worth of assets under management at the end of 2019. In March, it reported a profit of Dh46.8 million on total operating income of Dh277.9m for 2019. The company also set a target to grow assets to $20bn and increase recurring income through offering new products and expanding its fixed income business.

Shuaa Capital said in its statement on Wednesday that it has structured and invested in more than $4bn worth of debt deals in recent years, including almost $1bn of high-yield or alternative transactions.

"The ‘extend and pretend’ approach to restructuring debt no longer works. Corporates need to look at the full range of instruments available to optimise their balance sheet to grow out of their liquidity issues," Mr Alseddiqi said.

"Restructuring existing debt is only part of a wider restructuring exercise. There is almost always a need now for fresh capital," he added. "We believe that it is not prudent to wait and watch but to take quick action.”

A report published by Kamco Research last month forecast increased activity in GCC debt capital markets this year as governments step up borrowing to fund stimulus measures in response to the Covid-19 pandemic and lower oil prices.

More than $31bn in bonds and $10bn in sukuk had been issued by GCC governments by May 20, while corporate entities in the region had issued $19bn of bonds and $4.8bn of sukuk.

With more than $38.7bn of bonds and sukuk set to mature this year, the report  forecast that "fixed income issuances could overtake last year's level" of $140.8bn.