We would like to invite you to continue a survey you have started. ...

Do you trust your insurer ?

Strongly agree
Strongly disagree
Insurance provides peace of mind
Insurance is purchased only when compulsory
Terms and Conditions (small print) are clear and easily accessible
Insurance jargon (language) stands in the way of fully understanding each policy
Insurance companies try their best to uphold the details of the policy without cutting corners
Reducing risk, cutting costs and profits are more important to an insurance company than the customer
Insurance companies in the region are as professional as in other more developed markets
Age group
Do you feel your insurance provider works in your interest?
Have you had a rejected claim that you feel was not justified?
Do you trust your insurance provider?
Our Network

Register for our free newsletter

Latest News

Bonds dropped or shelved. Why do I care?

Bonds dropped or shelved. Why do I care?

Various high profile companies from across the region are cancelling or freezing plans to issue bonds. But why do you care?


March 10, 2011 4:15 by

Kipp has been struck by a pattern in the markets this last week or two. Here’s a few stories that will spell it out:

Emirates, the big company with all the fancy jets, has dropped plans for a bond. The company had mandated banks for a bond issue, according to reports, and it was expected to attract strong demand. “We tested the water and it was pretty muddy,” Tim Clark told Reuters in an interview on Wednesday at the ITB travel fair in Berlin. “So, we’ve parked it.”

Meanwhile, Arabtec, a big UAE construction company, has shelved plans to raise cash via a bond and rights issue. The company posted a profit last year, but it was down 38 percent year on year, while revenue was 29 percent down. Nonetheless as it announced the figures the company’s stock jumped, as it also revealed it would put the bond and rights issues on hold until “the market conditions become more favourable”.

And the National also reports that members of the Islamic Finance industry in the region are following a wait and see policy when it comes to new debt. The paper reports that Samad Sirohey, the chief executive of Citi Islamic Investment Bank, the Sharia-compliant arm of Citigroup, said while no companies had cancelled issuances of debt or equity, many seemed reluctant to come to the market in the current trading conditions. Those companies with maturing debt will resort to cash drawdowns, bank syndications and private placements to service their needs, apparently.

Why all this doubt about debt? Well it’s has to do with liquidity and risk. You see, the coupon on a bond (the interest you are paid on the money you paid for it) is set depending on various factors – interest rates, inflation, duration of bond, etc. But in the corporate world, the coupon also has to pay a premium to reflect the fact that the company may go bust and fail to make the payments or return your investment. The higher that premium, the harder it will be for company issuing the bond to keep up with payments.

Pages: 1 2


Tags: , , , , , , , , , , ,

Leave a Comment