Thinking outside the box
For providing issuers with a set of tools to navigate a fractured market, through unlocking ESG capital, accessing regional liquidity, and opening up new funding routes both public and private, Standard Chartered is IFR’s Middle East Bond House of the Year.
Bond volumes globally plummeted in 2022, and that downward pressure was acutely felt in the Middle East. Many corporates leant on banks with abundant liquidity to deploy, while buoyant oil prices meant jumbo sovereign issuance never materialised.
Still, in a year where Middle East hard currency bond volumes dropped around 61% year on year, there were deals to be done and Standard Chartered once more found itself topping the league tables. More tellingly, the bank increased its market share.
“In these tough markets when all avenues are shut, you need outside-of-the-box thinking,” said Salman Ansari, head of capital markets West.
The usual template had to be thrown out given the prolonged periods of market inactivity and rising funding costs. Instead, issuers and their advisers had to be more strategic.
Waiting for the appropriate window was key and nowhere was this better illustrated than in the debut trade for Saudi Arabia's sovereign wealth fund Public Investment Fund, which in October printed a US$3bn green offering that included a statement-making 100-year bond.
The deal was a big success, with 230 investors putting in orders for the century bond alone. But arguably even more important than that particular bond was the overall structure, given PIF’s role in the kingdom’s ESG transition story.
StanChart was one of two green structurers, as well as an active bookrunner, for the pivotal transaction. There was a large hurdle to clear to make the case for PIF as a viable green investment vehicle. It was funded by proceeds from Aramco's 2019 IPO and subsequently by a gift of a 4% stake in the state oil company.
“PIF was very challenging with the Aramco ownership angle and you have to get the framework right at the level that investors expect,” said Sarmad Mirza, head of corporate DCM, Middle East and North Africa.
Structuring the bond involved a two-way process with the buyside. “We had ESG personnel in from the big international accounts, so that’s how you know they will look at the framework and that joint partnership will get you to the finish line with the structure,” said Mirza. “This brought in the vast majority of the investor pool that cares about ESG into the fold.”
StanChart’s ability to help issuers overcome difficult conversations with investors over ESG matters was also apparent in a successful green hybrid for Majid Al Futtaim, following criticism over the shopping malls operator’s role in developing indoor ski slopes in the desert.
The bank also helped notch a few firsts for the Middle East. StanChart was a structuring agent behind the first AT1 sustainability sukuk, from Riyad Bank, and was the sole structuring agent behind the first sustainable sukuk from a UAE bank via a deal for Dubai Islamic Bank.
“ESG is bringing a lot of investors to the GCC region,” said Hussain Zaidi, head of bond syndicate, EMEA and Americas.
Another area where StanChart excelled was in the sukuk market, as issuers sought alternative sources of liquidity. There were deals for regular issuers in the product, such as Saudi Arabia, the Government of Sharjah and Dubai Islamic Bank. But the bank also brought a new name to the sukuk market – Arada Developments.
That deal also highlighted some other rare achievements for the region in 2022. In a year in which corporate activity was scatter-gun and high-yield issuance almost non-existent, the US$350m five-year sukuk by Arada in June and subsequent US$100m tap in October ticked both boxes.
A flexible attitude was required when it came to FIG issuance, where public volumes crashed. StanChart led banks away from traditional US dollar financing, helping First Abu Dhabi Bank print the first euro green bond from a Middle East issuer.
And an issue for National Bank of Oman typified the flexible approach, as a bank which had been unable to find a route into international accounts for an AT1 raised more than US$134m by tapping local investors. “Local investors have dollar liquidity and the Omani rial is pegged to the dollar. So investors were agnostic on the currency,” said Ali Ahmad, head of FIG capital markets, Middle East and Africa.
StanChart dominated the private side too. Private placements accounted for about 60% of FIG supply from the Middle East in 2022. These deals, for the likes of Qatar National Bank, Emirates NBD and Abu Dhabi Commercial Bank, were printed in various currencies, helping issuers tap into different pools of liquidity.
“This year has been unique,” said Ansari.
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