Dubai's largest lender makes move as part of plan to repay part of $3.43bn gov't loan
Emirates NBD, Dubai's largest lender, is planning to tap debt markets to raise a subordinated bond of at least $500m which would boost its supplementary capital ratios.
Sources told Reuters earlier this month that the bank, 56-percent owned by state fund Investment Corporation of Dubai, was planning such a sale in a bid to reduce government support for its capital ratios.
A successful sale will help Emirates NBD repay part of the AED12.6bn ($3.43bn) it received from the government in 2008. The bank said in January that it was looking to begin repayment of the funds.
Banks in the United Arab Emirates are expected to prioritise repayment of government support received in 2008 to shore up balance sheets, and converted into seven-year bonds in late 2009, as the value of the capital instruments has diminished and access to finance has become cheaper.
In February, Abu Dhabi Commercial Bank issued a $750m 10-year Tier 2 note at 265 basis points over midswaps. Other Abu Dhabi banks have also repaid some or all government funding this year.
Emirates NBD has mandated itself along with Citigroup, HSBC, JP Morgan Chase, Societe Generale and Standard Chartered to arrange investor meetings, to be held on March 22 in London and Singapore, a statement from the lead managers said on Wednesday.
A dollar-denominated subordinated Tier 2 bond may follow the roadshows, subject to market conditions. The deal will be benchmark-sized, which is traditionally understood to mean at least $500 million.
Shares in Emirates NBD ended 1.3 percent higher on Wednesday and are up 37 percent year-to-date.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.