Abu Dhabi Commercial Bank (ADCB) has bought back and re-issued about Dh1 billion worth of bonds that were to mature in November, people close to the deal told Emirates Business. The bank declined to confirm or deny the news.
The Abu Dhabi-based lender issued Dh2.1bn of bonds in 2007 with a maturity of two years and a coupon rate of 52 basis points above the Emirates Inter-bank Offer rate, or Eibor. Standard Chartered bank was the sole manager of the issue.
Instead of making a fresh offering to raise more cash, ADCB has opted to extend the maturity of the "2007 bond" by buying back half the paper worth about Dh1bn and issuing fresh debt maturing in 2011. The spread this time is about four times higher at 250 basis points above Eibor, in line with the market trend, the source said.
ADCB issued the fresh paper to the same institutions that subscribed to the original bond issue. An investment banker said banks "are lucky" if they can get investors to subscribe to their debt. The risk of debt has increased since the financial crisis hit the Middle East last year.
Spreads have increased substantially since the middle of last year. For the UAE banks, the blow was harder as overseas funds worth about Dh200bn that entered the market chasing an expected dirham revaluation disappeared from the country's banking. More banks will follow ADCB's footsteps as they are likely to find it difficult to raise funds from overseas, an analyst said. Banks such as Emirates NBD, Mashreq and National Bank of Abu Dhabi have bonds maturing in 2009 and 2010.
The bond guarantee scheme announced by the UAE Government will, however, give banks the confidence to approach the overseas market for funds and it will put them in an advantageous position in terms of pricing. Commercial Bank of Dubai has plans to raise money through this scheme. While Emirates Bank has $300 million worth of debt maturing in 2009, Mashreq has bonds worth $325m maturing in 2010.
The financial statements show that NBAD and National Bank of Dubai, now part of Emirates NBD, have debt worth about $850m and $750m, respectively, maturing in 2010.
Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.