Sept. 6 (Bloomberg) -- Deutsche Bank AG, the 17th-ranked adviser on bond sales in the Middle East and North Africa two years ago, vaulted to second place this year as credit markets in the region thawed following Dubai World's debt restructuring.
Germany's biggest lender advised on six bond sales worth $5.2 billion, second only to HSBC Holdings Plc, which has claimed the top spot for the past two years, according to data compiled by Bloomberg. The Frankfurt-based bank led Dar Al Arkan Real Estate Development Co.'s $450 million bond sale in February, the area's first offering this year, as well as the Bahrain government's sale of a $1.25 billion bond in March.
Bond sales in the Middle East are recovering after concern that Dubai World would default on its $23.5 billion of debt in November halted offerings in the region for almost three months. Companies and governments have raised $19.5 billion this year, 7 percent less than in the same period a year ago, the data show.
"We needed strong 144A bookrunners," said Michael Raynes, chief executive officer of Waha Financial Services, referring to two of the four banks it picked to manage a $1.5 billion sale in July. The Securities and Exchange Commission's Rule 144A allows overseas companies to tap qualified U.S. money managers without having to comply with U.S. disclosure rules. "Both Deutsche and JPMorgan fit the bill."
Deutsche Bank surpassed U.S. firms Goldman Sachs Group Inc. and Citigroup Inc. in the rankings this year. Goldman Sachs tumbled to 20th place from second in 2009, while Citigroup fell four places to 10th, the data show. Deutsche Bank was ranked ninth in 2009. A spokeswoman for Goldman Sachs in London and a spokesman for Citigroup in Dubai both declined to comment.
Biggest Islamic Bond
Deutsche Bank "moved its trading desks for Middle Eastern and North African markets into the region, boosted its local sales and coverage presence" and hired extra employees, Salman Al-Khalifa, the bank's head of global markets for the Middle East and North Africa, said in a telephone interview from Dubai. "Banks need to marry a deep understanding of local markets with a strong global execution capability."
Deutsche Bank was the principal paying agent and trustee for the $3.5 billion offering of sukuk, or Islamic notes, by Ports Customs and Free Zones Corp. in 2006, then the world's biggest Islamic bond. That offering helped propel the bank to the top of the rankings, according to money managers.
"Deutsche's main push came after the sukuk they did" for Ports Customs, Abdul Kadir Hussain, chief executive officer of fixed-income fund manager Mashreq Capital DIFC Ltd., said in an interview from Dubai.
Revenue Target
Deutsche Bank aims to double revenue in the Middle East and North Africa by 2012 by focusing on new bond and stock issues among other segments, Henry Azzam, the bank's regional chief executive officer, said in an interview in March. The lender doesn't disclose what proportion of its revenue it generates from the region.
The bank opened a branch in the Saudi capital, Riyadh, in 2006, in Qatar's capital Doha in 2007, and began setting up a Middle Eastern research unit in 2008. It also opened a branch in Abu Dhabi in 2010.
Gulf Arab economies pump more than 20 percent of the world's crude oil and have been spending tens of billions of dollars in infrastructure and industry to boost growth. Oil exporting economies of the Middle East and North Africa region will expand by an average 4.2 percent this year and by 4.6 percent in 2011, according to the International Monetary Fund.
Saudi Electricity
Governments and sovereign-backed companies have been the biggest issuers of bonds this year. State-owned Qatari Diar Real Estate Investment Co. sold $3.5 billion of five-year and 10-year notes guaranteed by the government of Qatar in July. The sale is the biggest from the area this year.
Other sellers included Saudi Electricity Co., the region's largest utility, which sold 7 billion riyals ($1.9 billion) of sukuk in April. National Bank of Abu Dhabi PJSC, the second- biggest bank in the United Arab Emirates, sold regular and Islamic bonds in U.S. dollars and Malaysian ringgit.
HSBC has been one of the top two managers of bond issues in the Middle East and North Africa in each of the past four years, according to Bloomberg data.
The London-based bank has been in the Middle East "for over a century and its extensive presence and relationships" with governments, companies and investors helps, Andrew Dell, HSBC's head of debt capital markets for emerging Europe, Middle East and Africa, said in an e-mail from Dubai.
Lending Role
HSBC's role as a lender to "a lot of issuers makes it easier to get mandates," Hussain at Mashreq Capital said. HSBC's clients this year include Qatari Diar Finance QSC, Bahrain Mumtalakat Holding Co. BSC, the Egyptian government and Saudi Basic Industries Corp.
Companies in the Gulf will have to refinance about $28 billion of debt that matures in 2012, about a fifth of the estimated $145 billion debt outstanding among companies of the six-nation Gulf Cooperation Council, Moody's Investors Service said in a June report.
Deutsche Bank has a "robust pipeline" of future work in the Middle East, Al-Khalifa said. Still, "it would be great to see equity market issuance come back" as it that would give companies more options to raise money, he said.
Companies in the Middle East and North Africa raised $1.5 billion in initial public offerings this year, a 33 percent decline on the year-earlier period, Bloomberg data show.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net