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Dubai: The value of rights issues by Gulf-based companies jumped 242 per cent to a record $15.76 billion between July 2007 and June 2008 compared with the previous 12-month period, a study by a leading law firm showed.
In the last six months alone rights issues in the Gulf Cooperation Council (GCC) have raised $11.9 billion from shareholders, according to Trowers & Hamlins.
It said rights issues by GCC-based companies are mostly being used to fund regional and international expansion unlike British companies that are using rights issues to repair balance sheets damaged by the credit crunch.
The record figure of 2007-08 is a rapid recovery from the $4.6 billion raised through rights issues in the previous year when a fall in the region's stock markets undermined plans for wider capital raising through secondary share issues.
"The increased equity issuance comes on top of record bond issuance by Gulf-based companies in the last year of $17 billion of corporate sukuk and $11.2 billion of conventional corporate bonds," Trowers & Hamlins said in a statement.
Forty-seven per cent of all Gulf rights issues over the last year were issued by banks and financial services companies.
"The Gulf stock markets and the companies listed on them are maturing rapidly. The oil led boom has provided a tremendous boost to the profitability of Gulf companies and their strategies for expansion," said Andrew Rae, a partner with the law firm.
"Ten years ago Gulf companies largely restricted their ambitions to their local markets but now they have become increasingly sophisticated and ambitious. They are looking at regional and international growth opportunities but still need to raise additional capital to fund that expansion," Rae pointed out.
He added that Al Rajhi Bank, Saudi Telecom, Sabic and etisalat are now among leading global companies by market capitalisation, and that other Gulf-based companies, particularly in real estate and telecoms, are committed to competing on an international basis.
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