DOHA: Corporates in Qatar are hesitant to depend on bonds and equity markets for funding. They are are largely limiting their funding options to financial institutions and government sponsored entities, a top Executive of Allen & Overy said
Allen & Overy, the international legal practice, said in its “Corporate Funding Monitor” yesterday that the total value of finance, across loans, bonds and equity, provided to business globally has hit a record level, exceeding $6 trillion for the first time in 2014, indicating a structural shift rather than a return to pre-financial crisis normality.
Research conducted by the legal practice during 2014 showed that while total funding to corporates in Africa and Middle East was up 9 percent last year to $120bn, there has been a significant increase in the use of bonds and equity over the past year. Funding overall in the region remains nearly 30percent below the 2007 pre- financial crisis peak of $172.9bn.
Samer Eido, the Managing Partner of Allen & Overy’s Doha office commented: “2014 was a strong year for corporate funding across the region including in Qatar where debt financings, and in particular loans, continue to be the preferred source of funding. Corporates in Qatar are still hesitant to access the bond and the equity markets which, with one or two exceptions are still limited to financial institutions and government sponsored entities.”
The legal practice’s Corporate Funding Monitor has highlighted a fundamental change in the way in which corporates (excluding financial institutions and real estate companies) access finance. Thomson Reuters data shows the type of financial products used has altered significantly – with the value of bonds issued by businesses increasing by 70 percent since 2007 to over $1.50tn, despite a 10 percent year-on-year fall in 2014.
The value of loans made globally to corporates has exceeded the pre-crisis peak of $3.87tn, totalling $3.93tn in 2014. However, while loans remain the predominant source of funding for corporates globally, accounting for 63 percent of the total, it is apparent that it is not just banks that provide them.
Angela Clist, head of Financial Institutions Group at Allen & Overy, commented: “Corporates have more options than ever before, and there is no ‘one-size fits all’ approach. We expect markets to continue evolving, adding new dimensions to corporates’ decision making matrix. As competition continues to increase not only in the type of products corporates choose, but locations where they source funding and the players who ultimately provide it, banks have an increasingly pivotal role to play in facilitating access to this broader and more global market.”
The Peninsula
