x Abu Dhabi, UAEThursday 27 July 2017

Guidelines issued for bond sellers in the Gulf

Banks have drafted a list of pointers for organisations seeking to raise new capital on credit markets.

Banks have drafted a list of pointers for organisations seeking to raise new capital on credit markets.

The move is intended to improve transparency and provide a stamp of approval for bonds and sukuk issued in the Gulf.

The guidelines were drafted by the Gulf Bond and Sukuk Association (GBSA), an industry body composed of 27 banks and other financial services firms.

With greater numbers of Gulf companies seeking to raise new capital, proper disclosure standards would be key to help attract investors, said Andrew Dell, the chairman of the GBSA and the regional head of debt capital markets at HSBC.

"The growing importance of debt markets for the region makes it crucial that we promote best practices and standards across all elements of the industry," he said. "We expect that issuers will refer to these new standards as best-practice benchmarks."

The document sets out standards of disclosure for sellers of bonds and sukuk in the region, and is supported by the Institute of International Finance.

Dubai's debt crisis was exacerbated by the opacity of links between the emirate's state-owned holding companies and poor levels of disclosure. Nakheel, the developer of Dubai's man-made islands, recently encountered a sell-off of sukuk issued to trade creditors, partly brought about because some of the assets backing the Islamic bonds were reported to be unreclaimed plots on the Gulf seabed.

About US$25 billion (Dh91.82bn) in bonds and sukuk come due in the Gulf next year, with significant risks for companies and governments seeking to refinance during the next three years, according to Standard & Poor's, the ratings agency.

Improved standards may also help family offices and other smaller investors, said Harris Irfan, a managing partner at Cordoba Capital, an Islamic finance advisory firm.

ghunter@thenational.ae

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