In early February, the head of National Bank of Abu Dhabi (NBAD) was adamant that the bank was in no rush to tap the markets. With Greece's debt troubles topping the daily news and talk about a 40 per cent haircut for Dubai World creditors, his attitude made perfect sense. "We don't have our back against the wall," Michael Tomalin, the chief executive of NBAD, said at the time. "We are not obliged, but if we do [issue bonds], it will give us more flexibility." Six weeks later the lender, an investor darling considered a play on Abu Dhabi's heavy infrastructure investments, is on a roadshow selling its bonds to investors around the world.
NBAD, which is 70 per cent owned by the Government, yesterday closed up 0.4 per cent at Dh12.40 in a flat market. Investors have good reason to rejoice the thawing of the credit markets. For one, new debt issues mean more opportunities to invest. The relatively small number of regional bonds has so far left investors with little choice, preventing the market from taking off. "In bonds particularly, investors tend to buy and hold," said Helen Holmes, a fund manager at EIS Asset Management, a unit of the Dubai-based bank Emirates NBD. "There is also a real lack of opportunities available. Now we hope that more liquidity will come to the market as it develops."
Now NBAD and Saudi Arabia's Banque Saudi Fransi are vying for the first issue to successfully break the deadlock that has firmly gripped the markets since Dubai World's November 25 standstill announcement. Dar Al Arkan's US$450 million sukuk issued last month was considered a mixed success because it was scaled back by half and expensive at 10.75 per cent. The state-owned utility Dubai Electricity and Water Authority also plans to issue a $1.5 billion bond by early April. Secondly, the times of high deposit rates are over. Banks have sharply lowered their deposit rates from about 5 per cent to 2 per cent to 3 per cent. Desperate for fresh funds, banks started offering hefty deposit rates early last year.
"Many of these [one-year] deposits have matured or are maturing right now. If investors can afford a little bit more risk they are getting out of that and buying into corporate and sovereign issues," said Ms Holmes, whose bank launched its first conventional MENA fixed-income fund earlier this week. @Email:email@example.com