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Thu 1 Feb 2018 11:03 AM

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Dubai Islamic Bank launches $1bn sukuk

The instrument will carry a dual listing on Nasdaq Dubai and the Irish Stock Exchange

Dubai Islamic Bank launches $1bn sukuk

Dubai Islamic Bank has launched a five-year $1 billion sukuk due to mature in February 2023, the bank announced on Wednesday.

The issuance, which emanates from the bank’s $5 billion sukuk programme, carried a profit rate of 3.65% and marks the first dollar-benchmarked sukuk transaction from the GCC in 2018.

The RegS transaction was executed following an investor meeting in Asia last year and a deal-related roadshow in London on January 29, 2018. A total of 120 orders were received as part of a $1.83 billion order book – nearly 2 times oversubscription.

The instrument will carry a dual listing on the Irish Stock Exchange and Nasdaq Dubai.

Initial price thoughts of MS+130bps were released on the morning of January 30, with a final price guidance at MS+115bps. The issuance’s final price guidance with a profit rate of 3.625 percent came in at the tightest end of price guidance, which the bank said was a reflection of solid demand.

“We are delighted with our successful return to the market with this landmark sukuk issuance of $1 billion”, said Dr. Adnan Chilwan. Group CEO DIB.

“This is the second time that DIB has raised a billion dollar senior sukuk in as many years effectively leading with the first deal of 2018 and re-opening the market in the GCC.

"The tremendous investor interest from across the globe is clearly exhibited by the strong and widespread subscription demonstrating not only the continued attraction of DIB as a quality credit, but also the resilience of the sukuk market in general,” he added.

Additionally, Chilwan said that in 2018 the bank will continue the “growth 2.0” strategy it highlighted at the beginning of 2017.

Issam Kassabieh, a research analyst at Menacorp, said that Dubai Islamic Bank’s year-on-year net operating income (19.90%) and net profit (11.18 percent) put the bank “in a good financial position with a healthy increase in assets as well as a growing customer deposit base.”

“However, the bank called upon its investors to push forward a capital increase that would see the bank’s capital increase by 33.33 percent without having indicated or disclosed any strategic plans for its future that would require this amount of capital,” he added.

“Investors have been deterred by the lack of information despite the 45 fils dividend to be paid for the full year of 2017.”

Kassabieh noted that, from a strategic perspective, banks in Dubai Islamic’s position accumulate cash for large scale acquisitions, with other examples including the merger of First Gulf Bank and the National Bank of Abu Dhabi and that of EmiratesNBD and Emirates Islamic Bank.

“The question is what is DIB up to, and what do investors need to reassure them that subscribing to a relatively expansive stock will pay-off in the near future,” he added.

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