GCC Bonds and Sukuk Market Survey 2013 Highlights

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1 Kuwait Financial Centre Markaz R E S E A R C H Fixed Income Research Survey 213 Highlights Notes Before Reading This Report: * GCC: Gulf Cooperation Council * GCC Aggregate Bonds and Sukuk market includes: * GCC Central Banks Local Issuances (CBLIs): Fixed Income securities, including Treasury bills, Notes and Bonds issued by GCC central banks, mostly to regulate the levels of domestic liquidity. * GCC Sovereign Issuances: Bonds and Sukuk issued by GCC governments in local or foreign currencies for financing purposes. Markaz Research is available on Bloomberg Type MRKZ <Go> * GCC Corporate Bonds: Bonds and Sukuk issued by GCC corporate entities including Financial Institutions (FIs) and Government Related Entities (GREs). * The GCC Bonds and Sukuk market includes GCC Sovereign Issuances and GCC Corporate Issuances and does not include CBLIs. * A number of resources were utilized in the creation of this report; notable sources are Bloomberg, Zawya, GCC central banks websites, rating agencies reports and Offering Memorandums. * Every effort has been made to include and quote the majority of data that is accessible to Markaz. * All currencies were converted into US dollars for easy comparison. Authors: Rasha A. Othman VP - Corporate Finance Ext.: 1113 rothman@markaz.com Sparsh Kaur Senior Analyst skaur@markaz.com GCC Aggregate Bonds and Sukuk Market 213* * GCC Aggregate Bonds and Sukuk Market: includes GCC Central Banks Local Issuances, GCC Sovereign Issuances and GCC Corporate Issuances. The total value of new issuances in the Aggregate GCC Bonds and Sukuk market, during 213 was USD97.7 billion, a 14.5% increase in comparison to the respective period of 212. GCC Aggregate Bonds and Sukuk Market New Issuance 81,151 62,744 84,112 85,361 97,73 Aliya Sattar Faisal Analyst Ext: 1114 afaisal@markaz.com 19,628 2,822 25,518 43,627 48,243 23,53 Kuwait Financial Centre Markaz P.O. Box 23444, Safat 1395, Kuwait Tel: Fax: markaz.com Source: Bloomberg, Markaz Analysis The month of October witnessed the largest amount issued with USD13.5 billion raised, while the month of March witnessed the highest number of issues at a frequency of 44.

2 Amount raised (USD mn) Amount () R E S E A R C H 14, 12, 1, 8, 6, 4, 2, GCC Aggregate Bonds and Sukuk Market New Issuance 213 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Amount Raised Source: Bloomberg, Markaz Analysis GCC Central Banks Local Issuances GCC Central Banks Local Issuances ( CBLI ) are the fixed income securities including Treasury bills, notes, bonds and Sukuk denominated in local currencies and issued by GCC Central Banks primarily to regulate the level of domestic liquidity. During 213, USD51.56 billion was raised through CBLIs from Central Bank of Bahrain ( CBB ), the Central Bank of Kuwait ( CBK ), the Central Bank of Oman ( CBO ), and the Central Bank of Qatar ( CBQ ). This compares to USD4.25 billion raised by these central banks in 212, representing an increase of 28.11%. The number of issuances grew by 17.16%, increasing from 169 in 212 to 198 in 213. During 213, 5.74% of the total value issued was raised through 33 Sukuk issuances as compared to 4.6% raised through 25 Sukuk issues in , 5, 4, 3, 2, 1, - GCC Central Bank New Local Issuances , ,232 1, ,61 26,522 4,491 38,617 48, Conventional Sukuk Number of issues Number of issues Source: Central Bank Websites, Markaz Analysis The CBK raised the highest amount during 213 through 66 issues valuing USD25.41 billion, almost maintaining the same level of borrowing as last year (212: USD billion raised through 66 issues). The CBQ raised a total of USD16.2 billion through 49 issues, which represents a considerable increase of % from USD5.94 billion raised in 212. A total of USD1.9 billion raised by CBQ in 213 was through sukuk issuances. The CBB raised USD9.22 billion through 8 issuances, representing an increase of 17.43% from USD7.85 billion in 212. The CBO raised USD727.2 million through 3 issues, a 39.88% increase in value from the previous year. 1 The only publically and regularly available information of such issuances is from the Central Bank of Bahrain, the Central Bank of Kuwait Financial Centre Markaz 2

3 R E S E A R C H Conventional issuances represented 94.26% of the total CBLI value of which 52.28% was raised by CBK. However, CBK s share declined from 67.16% in 212, primarily because Qatar s conventional issuance more than doubled in 213 in comparison to the previous year. 6, 5, 4, 3, GCC Central Banks New Local Issuances Conventional Bonds USD mn 15, 1, GCC Central Banks New Local Issuances Sukuk USD mn Qatar Bahrain 2, 5, 1, Kuwait Qatar Bahrain Oman Source: Central Bank Websites, Markaz Analysis The largest number of CBLI issues had a maturity of less than 1 year, with 145 issues and a total value of USD billion. The 3 year and 5 year maturity terms experienced a boost in 213 primarily because of Qatar issuances totaling QAR8. billion (USD2.2 billion) in each of these maturity segments. 1 year 7.5 years 7 years 5 years 4 years 3 years 2 years 1.25 years 1 year <1 year , 1, 15, 2, 25, 3, 35, 4, 45, Source: Central Bank Websites, Markaz Analysis Maturity Profile of CBLI Total Value Amount raised (USD mn) Number of issues 213* * The GCC Bonds and Sukuk market includes GCC Sovereign Issuances and GCC Corporate Issuances and does not include CBLIs. The total value of new issuances in the GCC Bonds and Sukuk market, during 213 was USD46.1 billion, an increase of 2.3% in comparison to the respective period of 212. However the number of issuances decreased by 1.8% to 165 new issuances. Kuwait Financial Centre Markaz 3

4 Amount Raised () Amount Raised () R E S E A R C H New Issuance 64,774 45,112 46,142 28,333 3,1 35,554 33,389 3,595 5,467 11,881 12, On a quarterly basis, the highest amount of issuances was raised during Q4 214 at USD16.3 billion, wherein the month of October raised the highest amount at USD8.9 billion. The highest number of issuances was witnessed during Q1 213 at 57. 2, 16, 213 New Issuance , 8, , 1. Q1 213 Q2 213 Q3 213 Q4 213 Total Value - Breakdown by Country UAE entities remained the most active issuers in 213 raising USD18.8 billion through 111 issuances representing 41.4% of the total amount raised, and 67.79% of the total number of GCC new issuances. Saudi Arabian entities raised USD17.2 billion through 22 issuances, followed by Qatari entities which raised USD6.7 billion through 2 issuances, while the Kuwaiti bond market witnessed two new issuances raising KWD6 million (USD21 million). 2, 15, 213 New Issuance , 5, 5 - UAE Saudi Arabia Qatar Bahrian Oman Kuwait Total Value Kuwait Financial Centre Markaz 4

5 R E S E A R C H 1% 8% 6% 4% 2% % GCC Bonds & Sukuk Market New Issuance 64,774 35,554 33,639 45,111 46, Other GCC Issuances UAE Issuances Sovereign Vs Corporate Maintaining the same trend of previous years, corporate entities (including FIs & GREs)* raised 93.% of total value (USD42.9 billion in 213, through 161 new issuances. GCC sovereign issuances stood at USD3.3 billion raised by four new issuances: a USD1.5 billion 5 year bond issued by the government of Bahrain, a USD75 million 1 year sukuk issued by the government of Dubai, a USD5 million 3 year bond issued by the government of Dubai, and a USD5 million 5 year sukuk issued by the Government of Ras Al Khamiah. Saudi Arabian corporate entities were the leading corporate issuers in GCC during 213, raising USD17.2 billion through 22 new issues, followed by UAE corporate entities which raised USD17.1 billion through 18 new issues. Qatari corporate entities raised a total of USD6.7 billion through 2 new issues, Bahrain and Oman raised USD899.3 million and USD748.6 million through three and six new corporate issuances respectively, while Kuwait two corporate bonds were issued totaling KWD6 million (USD21 million). 6,75 New Issuance 3,25 38,362 42, Corporate Sovereign * FI: Financial Institutions GREs: Government Related Entities Conventional Vs Sukuk The total value raised by conventional new issuances (bonds) in the GCC market increased by 2.5% during 213 in comparison to the same period last year, reaching USD23.7 billion and slightly surpassing the value raised by the Sharia compliant Sukuk, which totaled USD22.3 billion. New Issuance 21,937 22,382 23,175 23, Conventional Sukuk Kuwait Financial Centre Markaz 5

6 Amount Raised () R E S E A R C H Breakdown by Sector During 213, the financial services sector was the most active sector in the GCC Bonds and Sukuk market, raising a total of USD19.8 billion through 122 new issuances, followed by the Government sector 2 which raised USD7.3 billion through five new issuances and the Power and Utilities sector which raised USD4.5 billion through five new issuances. New Issuance % 9.7% 8.9% 6.5% 5.32% 6.3% Financial Services Government Power & Utilities Industrial Real Estate Transport 2.6% 1.5% Communication Consumer 43.%.4% Oil & Gas Education Source: Bloomberg, Markaz Analysis Maturity Structure During 213, maturities of new issuances in the GCC Bonds and Sukuk market ranged from 4 months to 3 years. Issuances with five-year maturity raised the largest amount with USD13.3 billion or 28.8% of the total amount raised through 3 new issuances. Issuances with one year or less maturity were the most frequently issued with 68 issuances representing 41.2% of the total number of new issuances raising only USD2.4 billion. There were three new GCC issuances with 3-year maturity, raising together USD2. billion: USD5 million Dubai Government International Bond (DUGB 5 ¼ 1/3/43 Corp), USD5 million Qtel International Finance Ltd (QTELQD 4 ½ 1/31/43) and USD1. billion Saudi Electricity Global Sukuk (SECO 5.6 4/8/43). Five new perpetual issuances amounted to USD3.1 billion were issued: USD1. billion Dubai Islamic Bank Sukuk (DIBUH 6 ¼ 3/29 Corp) and USD1. billion Emirates NBD bond (EBIUH 5 ¾ 5/29 Corp) were the largest perpetual issuances during the year. The other perpetual issues were: USD5 million Majid Al Futtaim bond (MAFUAE 7 ⅛ 1/29 Corp), SAR1.7 billion (USD453.3 million) Almarai sukuk ( ALMARA 9/29 Corp), USD2 million GEMS MEA Sukuk (GMSEDU 12 11/29 Corp). 15, 12, 9, 6, 3, GCC Bonds and SukukMarket New Issuance 213 Maturity Profile Source: Bloomberg, Markaz Analysis Total Value 2 Government Related Entities/Corporates are considered Corporate entities in this report and classified according to the sector they operate in. Kuwait Financial Centre Markaz 6

7 Amount ( ) Amount Raised ( ) R E S E A R C H Size The size of new GCC Bonds and Sukuk issuances, during 213, ranged from USD2. million to USD4. billion. A total of 15 new Issuances with principal amounts equal to or greater than USD1. billion raised the largest amount of USD19.8 billion, or 43.1% of the total amount raised. Saudi Arabia s General Authority of Civil Aviation sukuk (SGACA /7/23) was the largest issuance in 213, raising a total of SAR15.2 billion (USD4.1 billion). 25, 2, New Issuances 213 Size Breakdown , 6 1, 4 5, 2 Issue Size < USD 1 Mn USD 1 Mn Issue Size < USD 2 Mn Total Value USD 2 Mn Issue Size< USD 5 Mn USD 5 Mn Issue Size < USD 1, Mn Issue Size USD 1, Mn - Currency Structure The GCC Bonds and Sukuk market, during 213, was dominated by the US Dollar denominated issuances with USD31.1 billion raised in the currency, representing 67.4% of the total amount raised. Saudi Riyal denominated issuances raised USD1.6 billion, followed by EURO denominated issuances which raised USD1.2 billion. 35, 3, 25, 2, 15, 1, 5, GCC Bonds and Sukuk 213 New Issuance- 213 Currency Structure USD SAR KWD OMR AED MYR CHF CNY EUR HKD Others Total Value - Credit Rating During 213, a total of 61 GCC new issuances were rated by either one or more of the following Rating Agencies: Standard & Poor s, Moody s, Fitch, and/or Capital Intelligence. The highest rating was assigned to the two sukuk issuances of Islamic Development Bank: a USD1 billion 5 year sukuk (ISDB /4/18) and a USD7 million 5 year sukuk (ISDB FLOAT 3/27/18)), which were both assigned AAA, Aaa and AAA by S&P, Moody s and Fitch, respectively. Kuwait Financial Centre Markaz 7

8 R E S E A R C H New Issuance 213 A 21.3% A+ 32.8% A- 13.1% BBB+ 1.6% BBB- 6.6% BBB 3.3% Non-Investment, 11.5% AAA 3.3% AA-, 6.6% BB+ 1.6% BB 3.3% B+ 3.3% B 1.6% B- 1.6% Source 3 : Bloomberg, Markaz Analysis Listing During 213, a total of 73 GCC Bonds and Sukuk issuances, with an aggregate value of USD39.9 billion, were listed on Exchanges; out of which, a total of 61 issuances totaling USD28.3 billion were listed on international exchanges versus twelve issuances with a total value of USD11.6 billion were listed on regional exchanges. Listing of New Issuances on Exchanges 213 Regional Exchange Muscat Securities Market Dubai Financial Market NASDAQ Dubai Saudi Arabia 249 (5 issues 1,25 (2 issues) 2,591 (4 issues) 7,5 (1 issues) International Exchange Oslo Six Trace Bursa Malaysia Borse Frankfurt Luxembourg London SE Dublin 95 (1 issue) 7 (3 issues) 855 (3 issue) 1, (1 issues) 1,4 (3 issues) 2,677 (11 issues) 6,769 (16 issues) 14,848 (23 issues) Source: Bloomberg, Markaz Analysis GCC Bonds Market- Amount Outstanding (as of 31 Dec 213) As of 31 December 213, the total amount outstanding in the GCC Bonds and Sukuk market was USD241.8 billion; out of which: Bonds and Sukuk issued by UAE entities represented the largest share with USD116.7 billion or 48.3% of the total amount outstanding. Corporate issuances, (including financial institutions and GREs), made up 73.4% of the total amount outstanding with USD177.4 billion in total value. Financial Institution issuances represented 29.8% of total amount outstanding at USD71.9 billion; followed by the Government issuances that represented 26.6% of the total amount outstanding at USD64.39 billion. US Dollar denominated issuances comprised 73.5% of total amount outstanding, followed by Saudi Riyal denominated issuances with 13.1%. 3 For Chart Presentation S&P ratings have been used. If an entity is rated by other agencies and not S&P, the highest rating is considered and then corresponded to the S&P equivalent Rating in the chart. Kuwait Financial Centre Markaz 8

9 R E S E A R C H Conventional Bonds represented 67.2% of the total amount outstanding Amount Outstanding as of 31 Dec 213 by Maturity -USD bn Perpetual UAE Qatar Saudi Arabia Kuwait Bahrain Oman 25.1% 48.3% 19.7% 1.7% 4.6%.6% Government Financial Services Oil & Gas 14.1% 9.5% Power& Utlilities Transport Real Estate Communication Industrial Conglomerate Consumer 29.8% 6.8% 6.6% 3.4% 26.6% 2.2%.4%.6%.1% Education Credit Default Swaps 4 During 213, Abu Dhabi 5Y CDS tightened by 34.6% to 55. basis points, followed by Qatar 5Y CDS that tightened by 28.4% to 59. basis points, followed by Saudi 5Y CDS that tightened by 23.6% to 55. basis points and Dubai 5Y CDS that tightened by 7.2% to basis points. On the other hand Bahrain 5Y CDS widened by 26.3% to 24. basis points. Opening CDS Closing CDS GCC 5-Year Sovereign Credit Default Swaps Spread Percent Change During Basis Points Basis Points 213 Basis Points Lowest CDS Highest CDS Average CDS Date Basis Points Date 213 Abu Dhabi % Dec Jun Qatar % Dec Jun Saudi Arabia % Dec Jun Dubai % Sep Jun Bahrain % Jan Jun Source: Bloomberg and Markaz Analysis 4 Credit Default Swaps ( CDS ) for Kuwait and Oman are not priced. Kuwait Financial Centre Markaz 9

10 Key GCC Corporate Bonds and Sukuk Issuances -213 Type Issuer Name Country Currency Subscription Month Tenor (Years) Maturity Date Issue Size (US$ mn) R E S E A R C H Sukuk General Authority of Civil Aviation SGACA /7/23 Saudi Arabia SAR October 1. 7-Oct-23 4,56* 3.21% Government -/-/- Sukuk Sadara Basic Services Co Sadara basic Services Co. Saudi Arabia SAR April Dec-28 2,* 1.95% Industrial -/-/- Sukuk Ooredoo Tamweel Ltd QTELQD /3/18 Qatar USD December 5. 3-Dec-18 1,25 3.4% Communications A/A2/A+ Sukuk Riyad Bank RIBL 11/11/2 Saudi Arabia SAR November Nov-2 1,66* 1.64% Financials -/-/- Margin Sector Rating S&P/M/F Conventional SABIC Capital I BV SABIC 2 3/4 11/2/2 Saudi Arabia EUR November 7. 2-Nov-2 1,8* 2.75% Industrial A+/A1/A+ Conventional SABIC Capital II BV SABIC 2 5/8 1/3/18 Saudi Arabia USD October 5. 3-Oct-18 1, 2.63% Industrial A+/A1/A+ Sukuk DEWA Sukuk 213 Ltd DEWA UAE USD March 5. 5-Mar-18 1, 3.% Power & Utilities BBB/-/- Sukuk DIB Tier 1 Sukuk Ltd Dubai Islamic Bank UAE USD March Perpetual Perpetual 1, 6.25% Financials -/-/- Conventional Emirates NBD Tier 1 Ltd Emirates NBD UAE USD May Perpetual Perpetual 1, 5.75% Financials -/-/- Sukuk IDB Trust Services Ltd IDB Trust Services Saudi Arabia USD May 5. 4-Jun-18 1, 1.54% Financials AAA/Aaa/AAA Sukuk Medjool Ltd Emirates Airlines UAE USD March Mar-23 1, 3.88% Transport -/-/- Conventional QNB FINANCE LTD Qatar National bank Qatar USD April Apr-2 1, 2.88% Financials /Aa3/A+ Sukuk Saudi Electricity Global Sukuk Co 2 Saudi Electricity Global Saudi Arabia USD April 3. 8-Apr-43 1, 5.6% Power & Utilities AA-/A1/AA- Sukuk Saudi Electricity Global Sukuk Co 2 Saudi Electricity Global Saudi Arabia USD April 1. 8-Apr-23 1, 3.47% Power & Utilities AA-/A1/AA- Conventional Ruwais Power Co PJSC RPCUH 6 8/31/36 UAE USD August Aug % Power & Utilities A-/A3/- Conventional QNB Finance Ltd QNBK 2 3/4 1/31/18 Qatar USD October Oct % Financials A+/Aa3/A+ Conventional QNB Finance Ltd QNBK 1/31/16 Qatar USD October Oct % Financials A+/Aa3/A+ Sukuk Sukuk Funding No 3 Ltd ALDAR /3/18 UAE USD December 5. 3-Dec % Real Estate /Ba2/- Conventional Emirates Airlines Emirates Airlines UAE USD February Feb % Transport -/-/- Conventional Batelco Intl. Finance No. 1 Lts Bahrain Telecommunication Bahrain USD May 7. 1-May % Communications BBB-/-/BBB- Conventional ADCB Finance Cayman Ltd ADCBUH 1/9/17 UAE USD November Jan % Financials A/-/- Sukuk AHB Sukuk Co ALHILA /8/18 UAE USD October 5. 8-Oct % Financials /A1/A+ Conventional MAF Global Securities Ltd MAFUAE 7 1/8 1/29/49 UAE USD October Perpetual Perpetual % Real Estate BB+/-/BB+ Sukuk Almarai Co Ltd ALMARA 9/29/49 Saudi Arabia SAR September Perpetual Perpetual 453* 3.% Consumer -/-/- Sukuk Dar Al-Arkan Sukuk Co Ltd Dar Al Arkan Real Estate Co. Saudi Arabia USD May May % Real Estate B+/-/- *1 SAR = USD.267; 1 EUR = USD 1.344; 1 AUD = USD.919 Kuwait Financial Centre Markaz 1

11 R E S E A R C H Type Issuer Name Country Currency Subscription Month Tenor (Years) Maturity Date Issue Size (US$ mn) Sukuk Saudi British Bank/The SABBAB Float 2 Saudi Arabia SAR December Dec-2 4* SAIBOR+1.4% Financials -/-/- Sukuk SAVOLA Savola Group Company Saudi Arabia SAR January Jan-2 4* 2.12% Consumer -/-/- Conventional Topaz Marine SA TPZMAR 8 5/8 11/1/18 UAE USD November 5. 1-Nov % Oil & Gas B-/B3/- Sukuk Saudi Bin laden Group SBG Sukuk Ltd Saudi Arabia SAR April Oct * 2.66% Real Estate -/-/- Sukuk Dar Al-Arkan Sukuk Co Ltd DARALA 5 3/4 11/25/16 Saudi Arabia USD November Nov % Real Estate B+/-/- Conventional ADCB Finance Cayman Ltd ADCB Finance Cayman Ltd UAE USD may May % Financials A-/-/A Margin Sector Rating S&P/M/F Conventional National Bank of Abu Dhabi PJSC National bank of Abu Dhabi UAE AUD March 5. 7-Mar * 5.% Financials A+/Aa3/AA- Sukuk Saudi Bin Laden Group SBGSUK 7/9/14 Saudi Arabia SAR July 1. 9-July *.% Real Estate BB/-/- Conventional Millennium Offsh. Millennium Offshore Services Superholdings LLC UAE USD February Feb % Oil & Gas B/B2/- Sukuk Almarai Co Ltd Almarai Co. Saudi Arabia SAR March Mar-2 21* 2.1% Consumer -/-/- Sukuk GEMS MEA Sukuk Ltd GMSEDU 12 11/29/49 UAE USD November Perpetual Perpetual 2 12.% Education -/-/- *1 SAR = USD.267; 1 EUR = USD 1.344; 1 AUD = USD.919 Kuwait Financial Centre Markaz 11

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