Welcome to the third annual Reuters International Financial Review (IFR) and Project Finance International (PFI) report on the Middle East capital markets. We publish the report at a time of unprecedented turbulence in the global markets. For much of this year the Middle East has shown a degree of isolation from the global problems, but the latest shocks to the system will have an impact even in this region. The story thus far this year in this growing market has been positive. Capital markets a

Certainly, one of the most obvious phrases would be "credit crunch", or some other variant such as "liquidity crunch". Many others would name "Bear Stearns" or "Lehman Brothers" in their apt description of the year, highlighting that the financial landscape changed dramatically in a few short months. One or two jokers might even, with a touch of irony perhaps, come up with something along the lines of "for sale" or "game over" to show how everything went downhill so quickly for many in the Weste

In July 2007, the Dubai Electricity and Water Authority (DEWA), the major utility provider in the Emirate of Dubai and wholly owned by the Government of Dubai, funded itself for the first time in the commercial paper market, raising US$1bn in finance, backed by a sale of receivables arising from customer accounts held by DEWA in Dubai. The transaction was unique in many ways and notable highlights were: * The funding occurred in the summer when the credit crisis first began, with extreme pressur

The world is currently experiencing a unique set of economic circumstances: the high prices of oil and gas, combined with a credit crunch, have conspired to create an especially favourable environment for the Middle East, which has the capital reserves to move forward without debt financing. But from the Arab perspective, the region's growth is about much more than oil. "The region is in the middle of an economic renaissance," said Nasser Al Shaali, CEO at the Dubai International Financial Centr

The amendment to the commercial companies law allows local family-owned businesses that convert into public companies to list a minimum stake of 30% of their issued share capital of the company; other companies not falling within the definition of a local family-owned business must offer a free float of 55%. The result is that local family-owned businesses no longer need to cede equity control on a public float. A local family-owned business is defined as a company fully owned by members of one

Moving into 2009, it is likely that mega projects in the Gulf will require the whole range of funding sources. ECAs can now re-emerge as important players in providing liquidity to the projects market, but since they were last predominant in the mid-1990s the ECA market has changed. The OECD consensus governing these multilaterals is still in place but many agencies now adopt more flexible interpretations of the agreement. They now offer substantial direct loans to projects – some untied to any

Industry analysts predict that the good times will continue throughout 2009 and beyond, buoyed by fast developing markets, healthy local liquidity levels and capital reserves, as well as a safe haven status. A surge in buy-side investor demand focusing on markets in the Gulf Co-operation Council (GCC) has seen a rise in "frontier" investment funds alongside a scramble for market share among ECM bankers. This is perhaps surprising given a sluggish performance by local equity markets. The MSCI ind

An important sign that the private finance initiative/public-private partnership procurement model had gained acceptance among the Gulf states was the launching of the Mafraq-Ghweihat design build finance and operate (DBFO) road deal this summer. The 25-year concession deal will cost US$2.65bn in capex and covers the existing 327km road from Abu Dhabi to the Saudi border. The project will be a traditional PFI/PPP-style scheme, with payments to the concessionaire based on making the road availabl

Overall, in the first nine months of 2008, TAQA has raised around US$8.75bn through a mixture of debt and equity. However, this figure hides the fact that US$3.1bn of that was technically raised twice, as an original loan was refinanced. In a constricted global market, being buffeted by a lack of confidence and a lack of liquidity, this amount of fundraising is an impressive feat and represents a massive amount of faith among the international banking community in TAQA. The year had barely begun

A region with billions of petrodollars would not seem an obvious place for lending banks to look for clients, especially not clients paying more than similar entities in other, more developed parts of the global market, but the Middle East is in growth mode and needs to pump in cash. It's nice to have money bubble up out of the ground. Even if the value of the dollar has suffered and remains under pressure, oil is still a very attractive source of export income. However, oil reserves will not la

So there shouldn't be a polemic as to the causes of why the sukuk market has slowed down? Wrong. What is curious about the stagnated state of the sukuk market is the propensity by some to attribute it to the debate among the Sharia scholars, culminating in the ruling by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) in February 2008. However, economics is ultimately the prime substantive reason for the relative lack of activity in the sukuk market, caused by

The latest list of prospective deals in the Middle East, produced by Project Finance International, shows the number of projects falling – from a height of 57 this time last year to 34 this year. This is due to two factors – one good and one not so good. The good point is that quite a few projects in last year's list were taken out because they have reached financial close. The not so good point is that other projects have been taken out because they are too marginal to be considered real prospe

Paying little heed to the global crisis, the breakneck rate of growth in sukuk issuance has been driven by eye-watering demand and supply fundamentals in the Gulf Co-operation Council (GCC) region; a region that this year has spawned two new prototype structures based on the latest Sharia-compliant conventions. Cash-rich investors from the Middle East have shown an ever-growing appetite for financial products that are faith-compliant. At the same time, the GCC region is in the throws of massive

In an environment increasingly restricted by tightening liquidity across international and regional financial markets, the Jubail Acetyls Complex Project (JAC Project) reaffirmed the resiliency of strong credits to attract significant amounts of project financing, while setting a new benchmark in the execution of construction-phase refinancings. The transaction has drawn considerable attention from developers, which, facing the confluence of surging project development activity across the GCC an

It started at the beginning of this decade when a small group of Saudi entrepreneurs, who formed Project Management Development Company (PMD), had a vision. The vision was to expand the product slate of petrochemicals produced in Saudi Arabia so as to derive greater added value from the oil and gas resources available in the Saudi Arabia, as well as to facilitate the potential development of new downstream industries in the Kingdom. The Saudi Government embraced this vision as it was aligned wit

In August, Sorouh Real Estate priced a multi-tranche sukuk issue totalling Dh4.016bn (US$1.09bn). The most senior, class A tranche (rated Aa3/A by Moody's/Standard & Poor's) of Dh2,761m was priced at 200bp over one-month Eibor; class B (A3/BBB–) of Dh251m at 250bp over, and class C (Baa3/BBB–) of Dh1,004m at 350bp over. A proposed deeply subordinated, unrated class D tranche of Dh1,004m was not issued. All have scheduled maturity dates in January 2012 and legal final maturities in January 20

Despite Tamweel having repeatedly tapped the capital markets for funding to support its growth, as being a specialist mortgage provider not a bank, it has missed out on customer deposits as a source of revenue. This July's Dh1.1bn five-year issue marked a departure, however, as Tamweel turned from asset-backed securitisation to an asset-based guaranteed deal. July 2007's fundraising, a US$210m asset-backed securitisation, showed the strength Tamweel had reached by securing the highest ever credi

We are witnessing the embryonic stages of an OTC derivatives market. Growth in demand for Islamic financing products generally has been prolific in recent years and the prospects for further impressive growth appear strong. Innovation in the finance sector has given more entities the opportunity to structure their finances in a Sharia-compliant manner. It is estimated that Islamic banking assets globally total about US$700bn–$900bn and McKinsey predicts that Islamic banking assets and assets und

Why is tranching viewed by some as being non-Shariah compliant when other credit enhancement techniques (similar or identical to tranching) are so widespread and accepted? What is the philosophical rationale behind such prohibition? The purpose of this article is to bring forward the debate on tranching and to highlight the need of transparent and coherent thinking to grow and develop Islamic finance. Scholars have provided mixed views on the ability to give different investors differentiated ri