A blessing or a curse? UAE constitutes majority of the Middle East’s debt market

4123The UAE was the most active nation in the Middle East in terms of debt capital market activity in the first half, accounting for 55 per cent of activity at $12.1 billion, followed by Saudi Arabia with 28 per cent, Thomson Reuters’ quarterly investment banking analysis for the Middle East region showed on Monday.

Bonds issued in the Middle East during the first half of 2014 fell 16 per cent from the same period last year, to $22 billion, dragged down by a slow first quarter. Investment grade corporate debt totalled $16.4 billion and accounted for 90 per cent of the first half total, said Nadim Najjar, managing director, for the Middle East and North Africa at Thomson Reuters.

During the second quarter, investment banking fees in the Middle East surged 72 per cent to $237.9 million from the previous quarter reflecting the continued vibrancy in M&A activity.

M&A activity totalled $14 billion in the quarter, 2-1/2 times the value registered during the previous quarter and the highest quarterly total since first quarter 2011, Thomson Reuters said on Monday.

In 2013, the total value of M&As across the Middle East and Africa region rose by 26.9 per cent to $64.2 billion, up from $50.6 billion in 2012, according to Mergermarket. The region also recorded the highest rise in deal value during the last six years with all quarters in 2013 posting values above $12 billion.

“Middle-Eastern equity and equity—related issuance during the first half of 2014 totalled $2.9 billion, a six per cent increase in activity from the same period in 2013 [$2.8 billion],” said Najjar.

Despite the quarterly uptick in investment banking fees, the total fees earned during the first half of 2014 registered a 19 per cent decline from the same period in 2013 to $375.9 million. Fees from completed M&A transactions totalled $110.9 million during the first six months of 2014, up three per cent from the same period in 2013, and accounting for 29 per cent of this year’s overall Middle-Eastern fee pool, he said.

“Equity capital markets [ECMs] underwriting fees totalled $99.4 million, up 187 per cent from the amount registered during the first half of 2013 [$34.6 million] and marking the best first half total for ECM fees in the Middle East since 2009. ECM fees account for 26 per cent of the fee pool. Fees from debt capital markets underwriting declined 39 per cent year-on-year to $64.5 million, while syndicated lending fees fell 53 per cent to $101.2 million,” Najjar added.

“Lazard earned the most investment banking fees in the Middle East during the first half of 2014, a total of $29.4 million for a 29 per cent share of the total fee pool. Lazard topped the Middle-Eastern completed M&A fee league table, while Qatar National Bank was first in the ECM underwriting fee rankings. HSBC and National Bank of Abu Dhabi took the top spots in the Middle Eastern DCM and loans fee rankings, respectively,” he said.

Najjar pointed out that value of M&A deals during the first half of 2014 declined four per cent from the same period last year to $19.7 billion. Domestic and inter-Middle Eastern M&A declined 49 per cent from the first half of 2013 to $6.9 billion during the first six months of 2014.

The largest deal during the first half of 2014 was Labregah Real Estate’s purchase of a $2.5 billion stake in Doha-based real estate development firm, Barwa Commercial Avenue.

Boosted by this deal, real estate was the most targeted sector, accounting 29 per cent of first half activity.

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