Beyond the IPO: The Strategic Rise of Equity-Linked Bonds in the MENA Region
October 22, 2025
This article was published in Chambers and Partners Equity Finance 2025.
The Middle East and North Africa (MENA) region’s equity capital markets (ECM) have seen a notable increase in activity in recent years. Fuelled by ambitious economic diversification programmes, privatisation initiatives and deep domestic liquidity, primary issuance has surged. In 2023 and 2024, the region solidified its position as a key area of growth in an otherwise subdued global landscape.
Alongside initial public offerings, underwritten secondary offerings are also gaining traction as major pre-IPO shareholders – including state-owned enterprises, sovereign wealth funds and large family offices – strategically monetise mature holdings, and as issuers aim to increase their free float to satisfy the requirements for index inclusion. However, this expansion in straight equity issuance has not been mirrored in the market for equity-linked instruments (hybrid securities that blend the characteristics of debt and equity), which remains comparatively underdeveloped. The MENA region’s contribution to the global market for equity-linked securities has been minimal, pointing to a market that is still developing from both a regulatory and an investor education perspective.
Equity-linked bonds take the form of either convertible bonds (convertible into the issuer’s own shares) or exchangeable bonds (exchangeable for shares owned by the issuer in a different entity). While equity-linked bonds are not yet a mainstream corporate finance tool for public companies in the MENA region, they can function as tactical tools engineered to navigate statutory pre-emption rights afforded to existing shareholders. Concurrently, a handful of landmark transactions have demonstrated their potential as sophisticated corporate finance instruments capable of attracting global institutional capital and achieving strategic objectives, such as stake monetisation and optimised funding costs.
The prevailing macroeconomic environment also shapes the appeal of these instruments. With global interest rates having risen from historic lows, increased conventional debt servicing costs make the lower coupons typical of equity-linked bonds more attractive to issuers. For investors, these instruments offer downside protection through their debt-like features, coupled with upside participation in equity performance through the embedded conversion option.
This article explores the dual identity of equity-linked bonds in the MENA region, analysing their structure and diverse applications, and the critical legal and regulatory considerations across key jurisdictions.