FGB plans benchmark bond sale

First Gulf Bank (FGB), the second-largest lender by market value in the UAE, has hired five banks for a new benchmark-sized bond sale, three sources familiar with the matter said on Tuesday.

FGB picked Citigroup, HSBC Holdings, National Bank of Abu Dhabi, Deutsche Bank and Standard Chartered for the deal, which is expected to be at least $500 million in size.

Strong demand for high-rated regional names and narrowing spreads in recent weeks is prompting firms like FGB to tap bond markets as they look to bring their borrowing costs down.

Two sources said the deal could be announced as early as Tuesday or Wednesday this week. The sources declined to be identified as the bond issue plan is not yet public.

All of the above banks are helping arrange an $800 million loan for FGB to fund its growth and expansion.

FGB's last two forays into the global debt markets have been through the sale of Islamic bonds, or sukuk, due to the pricing advantage offered by the more stable asset class during market volatility in the last two years.

The bank last tapped global debt markets in January when it raised $500 million through a five-year Islamic bond, or sukuk, as part of a $3.5 billion Islamic bond programme it established last year.

The sukuk was yielding 2.6 per cent on Tuesday afternoon, down from nearly 3 per cent about a month ago, according to Thomson Reuters data.

Yields on its $650 million sukuk issued last August have dropped about 23 basis points in the last 10 days.

The lender has a separate $3.5 billion euro medium term notes programme under which it issued a $500 million bond in 2009. That three-year bond is due to mature in November, and was bid close to par on Tuesday.

It also has an $825 million term loan maturing in late November.

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