How have changes to rules on business ownership made the UAE an attractive jurisdiction for securitisation?
One of the most eye-catching global economic success stories of the modern age has been the rise of the United Arab Emirates (UAE) – now the commercial capital, and a key strategic hub, of the Middle East and North Africa. A federation of seven individual emirates, the UAE boasts one of the most liberal trade regimes in the Gulf and ranks 16th in the world for the ease of doing business. The UAE is also proving an increasingly compelling destination for international investment and securitisation.
The reason? It’s home to two of the world’s most sophisticated financial services centres – the Dubai International Finance Centre (DIFC), and Abu Dhabi Global Market (ADGM) – which, together, form a business-friendly, efficient and legally robust offering for capital markets structures in the Middle East.
Here, overseas investors get the ease, reassurance and confidence of structuring investments or capital raising under the English common law system. This provides legal certainty, familiarity and the ease of structuring transactions under a regime akin to that of doing business in London or New York. The difference being typically lower costs, proximity to Middle East investors, and with the vast developing markets of Africa and Asia on the doorstep.
In early 2021, the UAE further increased its appeal when it removed longstanding restrictions on the foreign ownership of local businesses. Previously, any overseas owner of a UAE company had to appoint a local nominee to own 51% of the venture, which seriously limited their ability to use that company to raise capital. As they can now own a local trading business outright, it more than doubles the amount of potential capital they can raise.
How is the UAE delivering value through securitisation?
As raising capital from Middle East banks is challenging, investors are often driven to find alternative forms of financing, so this liberalisation may prove invaluable.
One powerful method of financing is securitisation, which provides a controlled opportunity to invite people to invest in a structure. UAE securitisation commonly involves transferring an asset into a special purpose vehicle (SPV), which then raises the desired capital by issuing securities, such as shares and bonds. These securitisation SPVs can be structured to be either Shari'ah or non-Shari'ah compliant.
Thanks to the recent change in foreign ownership laws, clients can now feel absolute confidence in using securitisation structures in the UAE – facilitating local transactions with local expertise, in a time-zone that makes it easy for everyone involved.
At Ocorian, we have deep and direct experience of what can be achieved in the DIFC and ADGM. As one example, our UAE team has completed a major UAE securitisation transaction for a local bank, using an SPV structure domiciled in ADGM for the purchase of a portfolio of UAE logistic and residential assets worth US$90 million. Ocorian tailored its offering to provide close assistance through the incorporation of the SPV, dealing with the ADGM registry, onboarding shareholders, coordinating board meetings and liaising with legal counsel.
Ocorian – your partner in the DIFC and ADGM
Ocorian has built this expertise in the UAE over the last 11 years, with a presence on the ground in both the DIFC and ADGM. Our skilled and experienced staff bring the same high level of financial services expertise we practice in mature jurisdictions such as the UK, Mauritius and the Cayman Islands to the Middle East. Here, we can provide expertise in everything from securitisation, structuring local SPVs to Shari'ah compliance.
This leaves investors perfectly placed to capitalise on the vast opportunity of the region, or to use it as a stepping-stone to the tantalising neighbouring markets of Africa and Asia. Meanwhile, our connected global footprint means we can also structure deals in all the key global financial hubs.
Find out more about our UAE services please contact our team. They’ll be more than happy to help.