Ratings appetite to spur bond market
Despite a handful of issuers withdrawing from credit rating agencies and vice versa, there are still several who are contemplating getting rated. Alpen Capital's ratings advisory services division, for one, is in discussions with about 10 companies in the GCC.
This appetite may lead to the revival of the corporate bonds market from the fourth quarter of this year.
The firm also has a dozen merger and acquisition mandates, with at least five set to close this year. None of them is a distress sale.
The consolidation, says Rohit Walia, Executive Vice-Chairman, Bank Sarasin-Alpen and Alpen Capital, is fuelled by family businesses' inclination to return to their core competencies. "What happened in the past two to three years is that everybody got into every business," he told Emirates Business. "A typical family business group has 10-12 businesses when they should have stayed in four or five," he said.
We've seen what happened in Damas, one of the first family businesses to go public in an international exchange. Did it present any setback for other families who would like to go for an IPO?
I don't think so. The corporate governance should have been much stronger there. They went public, but they did not follow the basic tenets of being a public company. It will be a learning [experience] for all of us – to the investment bankers, auditors, families on what it is to be a listed company.
Family businesses are said to shy away from demands to be transparent. Is that really the case?
Many of them are very mature in terms of transparency. The only reason they have not come to the market is they haven't felt the need to do so.
Are you arranging any bond issuance?
We would love to do that, but at the moment there is no market for corporate bonds. To do a corporate bond, you have to be rated, and nobody has been rated here at the moment.
We have a rating advisory services. The team tells you what you need to take to credit rating agencies to get yourself rated. We give a shadow rating, which tells [you] what we think your ultimate rating is or at least close to what it would be.
But are you in discussions with anyone who wants to get a rating?
We are now working with at least eight to 10 companies across the GCC to get them rated.
What about last year?
We had one transaction last year. It was with the ETA.
Which nevertheless withdrew from S&P…
Over the past two years, you have a list of companies that have come out of the rating exercise because of the negative effects in the region.
There has been a battle of words between the credit rating agency (CRA) and the issuer. What's your take on that?
It's difficult to comment [on]. You see, the credit rating agencies are under a lot of pressure – starting with Lehman to whatever is happening around the world. They've also become more prudent.
Despite the rise in CRisare still a handful of firms that are looking at getting rated. Is this a sign that the appetite for corporate bond issuance will come back this year?
I think so, maybe towards the fourth quarter. A few weeks back, there were reports that a couple of corporate bonds are coming from Muscat. In Dubai, there are some people working on bond structuring, but I haven't seen any.
Have you any mandate?
Not at the moment, but we are talking to clients. To get a bond, you have to get yourself rated first.
But wouldn't it be good for some type of investors? Is the market here just looking for investor-grade bonds?
It would be very good for investors. This market will mature. If I look at the past 10-15 years, when clients need money they go to banks. Nobody thinks of anything else.
If you go for a bond, it requires more disclosure about yourself to a larger number of people. In the bank, there are only a few people who see the information, but if you go to a bond market, the public sees the information.
We have heard a lot of pundits predicting M&As. But the number of M&As seems to be short of what was expected. Is that observation right?
A lot of discussions are going on. We are still running at least a dozen mandates at the moment, either on the buy or the sell side. Mandates in M&As take six to nine months to close.
How many will you close this year?
At least four or five.
Are these distress sales?
None of them is a distress sale.
Did you face payment defaults?
No. It all depends on the kind of people you deal with.
Our clients are some of the largest business family institutions in the region. We don't have a lot of clients.
PROFILE: Rohit Walia Executive Vice-Chairman and CEO of Sarasin-Alpen and Alpen Capital
Walia set up Bank Sarasin-Alpen and Alpen Capital in 2005 at the DIFC.
A seasoned banker with more than 25 years of international banking experience, Walia has worked with Mashreq bank in Dubai and Bank of America and American Express Bank in India.
At Mashreq, where he spent more than 11 years, Walia was the Divisional Manager for Commercial Banking Group.