Dubai's biggest bank joins other Gulf borrowers as investor confidence rises in region
Emirates NBD, Dubai's biggest bank, launched a $1bn five-year bond on Wednesday, joining other Gulf borrowers that have taken advantage this week of improved investor confidence in the region.
The lender is tapping debt markets for a third time this year to take advantage of better funding costs and liquidity which have allowed three other Gulf borrowers to announce bond plans this week.
The bond launched at a spread of 337.5 basis points over midswaps, in line with initial guidance. The deal received orders of over $3bn, according to IFR Markets, a Thomson Reuters service.
Once executed, the deal would be the second from a United Arab Emirates bank this week to launch and price within a single day, taking advantage of a window of opportunity being sensed by regional issuers.
National Bank of Abu Dhabi completed a $750m five-year deal earlier this week at 190 basis points over midswaps.
Both Emirates NBD and NBAD had recently met with international investors to prepare for a quick deal. At the same time, Saudi Electricity Co and Commercial Bank of Qatar have both picked banks for roadshows starting this week, with a bond deal anticipated after the meetings.
Improving market sentiment and narrowing spreads indicating growing investor confidence are buoying the primary market.
"NBAD tapping the market at such tight levels has been a culmination over the past few weeks of the rally we've been seeing across the board," said Thomas Christie, fixed income trader at Rasmala Investment Bank.
"A number of institutions saw these attractive funding levels achieved and looked to take advantage of the recent rally to tap the market."
The cost to insure Dubai debt against default has been falling as investor confidence returns amid improving prospects for a solution to the euro zone crisis and a flow of positive news both from the emirate and the region.
Dubai's five-year credit default swaps (CDS) were quoted at around 343 basis points, more than 40 basis points tighter than at the beginning of the month.
The story is similar across the region and debt markets are beginning to look attractive once more for raising long-term funding to meet rising spending costs and refinancing needs.
Emirates NBD's Islamic subsidiary EIB sold a $500m sukuk in January followed by the bank's 1bn yuan issue earlier this month, the first for a regional borrower.
HSBC, Deutsche Bank, Bank of America , National Bank of Abu Dhabi and Emirates NBD itself are joint arrangers and bookrunners on the latest deal.
The bank, 55.6 percent government-owned through the Investment Corporation of Dubai, was ordered by Dubai's ruler in October to take over loss-making Dubai Bank, which had been rescued by the emirate's government earlier in 2011.
It has reported a significant decline in profitability as a result of higher provisioning and is said to be in the process of cutting 15 percent of its workforce.
Shares in Emirates NBD ended 1 percent higher.