"There is a huge pipeline of sukuk issues to come to the market either in the second half of this year or early 2009," Jan Plantangie, managing director, Middle East, at Standard & Poor’s told reporters at the opening of its office at the Dubai International Financial Centre (DIFC) yesterday, adding that issuance could cross $ 100bn by the end of the decade.
Net borrowing by Middle East and African governments with debt ratings may triple this year to $ 23.4bn from $ 7bn in 2008, taking total medium and long-term borrowing in 2008 to $ 77.6bn, S&P said in a statement.
"The increase from 2007 reflects both a reduction in the repayment of debt and the rise in Middle East and African sovereigns’ borrowing requirements, which are partly due to a reduction in many sovereigns’ prospects for privatisation receipts," S&P said.
"Saudi Arabia, in particular, is expected to slow down its repayments of domestic debt substantially, accounting for almost $ 20bn of the net increase in borrowing alone."
Of the $ 23.4bn of new sovereign debt, Gulf Arab nations were still likely to only contribute a small portion in 2008, with the bulk being issued from large African Nations.
Meanwhile, Saudi Arabia’s state-controlled Saudi Telecom Co (STC) is looking to borrow at least 5.76bn riyals ($ 1.5bn) to help finance its purchase of a stake in Dubai-based Oger Telecom, three bankers said yesterday. STC, the largest Arab telecom company by market value, agreed last month to buy 35 percent of Oger Telecom for $ 2.6bn to gain access to markets from Turkey to South Africa.
"STC is looking at various options, including a syndicated loan, a private club deal or a sukuk, and is taking proposals from banks," one of the bankers said.
Sukuk are Islamic bonds that comply with a religious ban on interest and are instead backed by assets that pay rent or income. The sukuk would be priced in riyals.
STC, which is looking to borrow about 60 percent of the purchase cost, has invited all three bankers to submit financing proposals.
