Five-year bond will price at a spread of 250 basis points over midswaps
Commercial Bank of Dubai (CBD) is set to price its $500 million debut international bond issue on Tuesday after launching the deal at the tighter end of price guidance, indicating healthy investor demand.
The five-year bond will price at a spread of 250 basis points over midswaps, at the lower end of guidance indicated earlier in the day of between 250 - 270 basis points, arranging banks said.
Traders indicated that at current rates, this spread would equate to a yield of just under 3.5 percent.
Gulf Arab banks have stepped up bond sales this year, tapping into substantial investor appetite for bonds issued by regional financial institutions, with over $5 billion of dollar-denominated bonds issued so far this year.
The bank, 20 percent owned by Investment Corp of Dubai, has said proceeds from the bond issue will be used for general corporate purposes.
Strong appetite for the deal allowed the borrower to launch the bond at a lower price than initially suggested, with order books over 3.5 times covered, even though this is the Dubai-based lender's first international bond issue.
"Tight pricing seems to be the theme of the year, so I'm not surprised (about CBD)" one regional fixed income trader said.
If compared to its larger, and higher-rated, peer Emirates NBD, CBD, rated A- by Fitch Ratings, is still seen offering a premium to compensate for an extended maturity and a new issue concession.
Emirates NBD's 4.625 percent $1 billion bond, maturing 2017, was bid at 105.5 cents on the dollar on Tuesday, to yield just under 3.1 percent, according to Thomson Reuters data.
Emirates NBD is rated A+ by Fitch, and also has a higher government ownership than CBD.
Citigroup, HSBC Holdings and National Bank of Abu Dhabi are lead arrangers on the bond. CBD completed fixed income investor meetings earlier this week.