|By TAP Staff| The UAE Securities and Commodities Authority plans to introduce new rules that will make it easier for local companies to raise resources from the market through dirham-denominated bonds.
The new rules will also seek to reduce the cost of issuing bonds while making it faster for companies to issue and list their bonds.
“We would like to see more active bond and sukuk markets – we would like to see more listing, more trading,” Reuters quoted Mounther Barakat, senior research adviser at the SCA, as saying.
According to Reuters, ff successful, the project could help to reshape corporate financing in the UAE. At present, firms rely heavily on bank loans and to a lesser extent retained earnings; local currency bond issuance is minimal, and usually only the biggest companies can afford to issue bonds in the international market.
The new rules, which do not apply to issues by government bodies or state-owned companies, set a minimum issue size of just 10 million dirhams ($2.7 million), down from a previous floor of 50 million dirhams.
The SCA said it would shorten the time it took to review and approve issuance applications to five days, while private placements of bonds not listed on the UAE’s securities exchanges would not need SCA approval.
Issuers of bonds and sukuk now only need to make financial statements annually, instead of quarterly, and issuers no longer need to obtain credit ratings from rating agencies – potentially removing a major expense for them.
The rules do not attempt to drive trading onto exchanges as they allow off-market dealings in listed bonds and sukuk, as long as the trades are registered. Foreign investors may be encouraged by a provision allowing clearing and settlement abroad, through institutions such as Euroclear.
Dubai wants to become a top sukuk trading centre, and the SCA rules appear to facilitate that by taking a hands-off approach to religious permissibility; they do not specify which sukuk types can be used or distinguish between “asset-backed” and “asset-based” sukuk, a focus of debate in the industry.
“Our policy is to stay away from issuing fatwas,” Barakat said. Issuers’ own sharia advisers will rule on whether sukuk are permissible, while issuers can also seek guidance from the Dubai Financial Market’s shariah board.
In another move to stimulate activity, the new rules introduce the possibility of companies making competitively bid issues without engaging an arranging bank, though it is not clear how many companies will want to try this.
Follow Arabian Post
Select Arabian Post as your preferred source on Google and MSN News for trusted business news and Arab politics and updates.
