Lighting the path:
The Middle East is by far the biggest component of the emerging EMEA bond market. But it's not just a region of jumbo deals. There are plenty of issuers with much smaller needs that require banks' advice and care. For its ability to straddle all sectors, Standard Chartered is IFR's Middle East Bond House of the Year.
When DAS Holding, a company linked to UAE deputy prime minister Sheikh Mansour, needed help putting together a plan that would result in its debut international sukuk, it asked a local bank about the best way to approach the process.
The bank's advice was simple: call Standard Chartered.
"They mentioned that the start-to-finish exercise of what was being envisioned was complex and needed rating and real estate capabilities – and so they guided them our way," said Sarmad Mirza, executive director for MENA debt capital markets at StanChart.
At that stage, there wasn't even an issuing entity in place – just a hodge-podge of sprawling long-standing assets, mostly in real estate, that needed to be amalgamated.
StanChart worked with management to analyse the right assets with the most marketing appeal, engaged with ratings agencies, formalised the deal structure, and then – when the time was right – brought a debut transaction to market.
Its discussions with ratings agencies show the lengths to which StanChart went to get everything in place to ensure as smooth a transaction as possible for a new name in a tricky sector.
"We engaged with the agencies with a blueprint," said Mirza. “At that stage there was no company yet. We said 'Please give this blueprint a rating and if we meet the blueprint we can then go out with those ratings'.”
The plan worked. In February, a new company – Emirates Strategic Investments Company – was formed holding US$2.1bn of assets, rated Baa3 by Moody's.
Four months later, it was in the market raising US$600m through July 2024 sukuk that received US$3.7bn of demand. Impressively, more than 60% was allocated to investors outside of the GCC.
The deal speaks volumes about StanChart's Middle East capabilities. "You can't have leadership without an innovative set of transactions," said Salman Ansari, head of capital markets West, pointing to the ESIC transaction.
And it's not the only one. In real estate alone – arguably the most challenging sector for investors – StanChart led deals for Aldar, Emaar, Majid Al Futtaim (a rare green offering from the region) and Dar Al-Arkan. All of these were done without any bumps.
Indeed, unlike some of its rivals, none of the bank’s deals got pulled. While markets have been relatively accommodative, the Gulf continues to be more prone to bouts of volatility than any other region.
"It's been a strong performance by our platform," said Khalil Belhimeur, a syndicate official at the bank. "Issuers and investors know transactions will be handled well."
Take a US$1bn five-year deal for Saudi Arabian bank Samba. That was the first transaction by a Saudi financial since 2012 and Samba's first in nearly 15 years.
The transaction in late September came just a week after attacks on Saudi Aramco's oil processing facilities. The bank, though, had a very specific aim: to price 30bp back of the sovereign.
"We focused on Samba's credit fundamentals and on the scarcity of Saudi financial paper," said Belhimeur.
That careful marketing strategy worked. At 140bp over swaps, it came in line with Samba's target of the 30bp pick-up over the sovereign, tighter than where other national champions trade compared with their respective sovereigns.
Moreover, 73% of the deal was distributed internationally thanks to a more than 70% hit ratio from the roadshow.
"For a Saudi name in the midst of political noise in the kingdom, and in a week of US$16bn of supply from the GCC, to get 73% distribution internationally was a fantastic outcome," said Belhimeur.
The one obvious miss in StanChart's list of mandates was the US$12bn debut from Saudi Aramco. No doubt it was the most sought after transaction of the year. But it is just one deal for a region with more than US$80bn of issuance.
Impressively, even after taking into account the bank missing that mandate and other jumbo trades, such as from Abu Dhabi and Mamoura, it still ranked first in the league tables over the review period, according to Refinitiv, a reflection of the breadth of its business.*
One other pointer to StanChart's skills in the region is that it's the only bank that has managed to navigate the diplomatic spat between Saudi Arabia and Qatar, working on deals from both sovereigns in 2019.
* Corrects final league table position
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