BAA joins the ranks of ADR issuers

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BAA has joined the growing ranks of UK companies seeking to broaden their investor base in the United States through the setting up of an American Depositary Receipt programme.

The utilisation of ADRs, certificates traded in the US backed by shares in a foreign company, has grown dramatically over the past four years.

During 1992, foreign companies raised more than dollars 8.5bn ( pounds 5.63bn) in fresh capital via ADR issues, up from dollars 6.9bn last year and only dollars 2.6bn in 1990. The BAA programme does not entail any raising of new capital, but simply involves setting up a depositary programme under which existing BAA shares can be traded over the counter in the US through the ADR mechanism.

BAA has a strong following in the US, with around 4 per cent of its stock in the hands of American investors. The company is studying new business opportunities at airports in the US.

During 1992, UK companies raised just over dollars 2bn through ADRs, with the biggest individual issue coming from Wellcome which sold dollars 1bn worth of stock in an August offering of ADRs listed on the New York Stock Exchange.

Other issues included a dollars 330m offering from Waste Management International, two separate issues from Enterprise Oil totalling dollars 280m, and an offering from the Royal Bank of Scotland which raised dollars 400m in August.

Executives at the main depositary banks, principally the Bank of New York, Citibank and JP Morgan, expect to see more UK companies coming to the market during 1993, and strong demand from companies in other European countries.

'There is no question that more US investors are going to buy non- US shares, and more non-US issuers are going to look to the US capital markets,' Tom Sanford, vice-president at the Bank of New York, said. 'We have all the ingredients for growth.'

The attraction from the perspective of the American investor is that ADRs look like normal shares in US companies, and are priced in US dollars.

Many US investors do not want to have to deal in foreign currencies in order to buy and sell overseas shares, nor face up to the many different clearing and settlement procedures on overseas markets.

For Asian and Latin American issuers, Citibank expects to see more use of the Global Depositary Receipt, which has been growing in popularity as a more flexible variation on the ADR structure. The GDR allows the same receipt to trade in different markets, whereas ADRs are only tradeable in the US.

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