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Fri 19 Mar 2010 06:54 AM

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Abu Dhabi's NBAD sells $750m worth of 5-yr bond

New bond by National Bank of Abu Dhabi priced at 178 basis points - sources.

State owned National Bank of Abu Dhabi sold a five-year benchmark bond worth $750m on Thursday, the first debt issue from the United Arab Emirates since Dubai's debt crisis erupted in November.

The new bond by NBAD, the largest lender in the Gulf oil producer by market capitalisation, was priced at 178 basis points over mid swaps, two banking sources told Reuters, and was likely to set a benchmark for other UAE banks.

"It is 178 basis points, $750 million final," one of the sources told Reuters, adding demand for the paper stood at around $3.7 billion.

The bank confirmed the size of the bond, which matures on March 21, 2015 and is part of its EMTN programme, as well as the pricing.

The bank was seeking to raise $500 million to $1 billion, an executive told Reuters this week, to fund what it described as general purposes. Guidance was set at 180-190 basis points above mid swaps, IFR Markets, a Thomson Reuters service, reported.

NBAD, rated 'A plus' by Standard & Poor's and 'Aa3' by Moody's, is exposed to debt-ridden Dubai World units and it said earlier this week it may book more provisions against bad loans in the first quarter.

Bank of America Merrill Lynch, Barclays Capital and NBAD were lead managers for the bond issue.

Dubai's unexpected demand last year for a repayment freeze on $26 billion worth of debt at its flagship company Dubai World has soured investor sentiment towards government-linked entities in the Gulf with some delaying issuance plans. But improved appetite towards emerging debt has encouraged some Gulf issuers, including state-owned utility Dubai Electricity and Water Authority, to test the markets even as a Dubai World debt restructuring offer gets closer.

"People have been a bit sceptical on financials. NBAD is the best name out there," said a banker at a large international lender.

"They will set a bottom with any other financial name to come out having to pay higher than that. But it will not be NBAD setting a tone, everybody will be looking at Dubai World restructuring," he said.

NBAD, which is 70 percent owned by Abu Dhabi's government, last tapped the market with a similar-sized issue in September when it placed a five-year, $850 million paper with a coupon of 4.5 percent.

The yield on the bond, which matures in September 2014, stood at 4.252/3.885 percent on Thursday.

The cost of insuring five-year NBAD debt (CDS) stood at 157 basis points on Thursday, above the 104 points for the emirate of Abu Dhabi.

In February, the bank postponed plans to issue new convertible bonds in dollars and dirhams until market conditions improve. (Reuters)

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