Business | Banking
Commercial Bank sets $2b notes programme
Commercial Bank of Dubai (CBD) has set up a debut $2 billion (Dh7.34 billion) notes programme to help finance growth, but is unlikely to draw on the debt at present because market conditions remain difficult.
- Reuters
- Published: 23:35 September 25, 2008
Dubai: Commercial Bank of Dubai (CBD) has set up a debut $2 billion (Dh7.34 billion) notes programme to help finance growth, but is unlikely to draw on the debt at present because market conditions remain difficult.
Dubai's third largest lender by market value set up the Euro Medium Term Note (EMTN) facility so it could "move quickly" if opportunities arise, John Tuke, Deputy General Manager for Treasury and Asset Management at CBD, said yesterday.
"We don't have any medium-term borrowings at this stage and in terms of prudently managing the balance sheet and to make sure our maturities are a bit better, we decided to get some," Tuke said. "Even if we could do an issue we would not look at $2 billion in one go ... We have no immediate requirement for that (amount)."
The bank, 20 per cent owned by the Dubai government, focuses primarily on corporate banking and had assets of Dh33.4 billion as of March 31.
Not open
Market conditions were "not open", meaning a benchmark senior bond issue, typically about $500 million, was unlikely, Tuke said.
The bonds, whose lead arrangers were HSBC and BNP Paribas, would be listed on the London Stock Exchange.
CBD's funding plans follow Islamic lender Dubai Bank, which said on Wednesday it had set up a $5 billion Islamic bond programme.
Both programmes come at a time when a global credit squeeze has virtually halted lending from international banks to regional banks as they ride out the turmoil spreading from the US financial markets.
Defaults on US home loans and the ensuing credit squeeze have raised funding costs, prompting many Gulf borrowers to delay bond sales as banks became more reluctant to lend.
"Banks are holding off to get funds more cheaply elsewhere ... People are waiting to see what will happen with the financial package in the US and once that is clear it could give more confidence to some of the banks," Tuke said.
The United Arab Emirates central bank launched on Monday a Dh50 billion emergency funding programme to grease the money markets.
The facility aims to reassure banks that ample funds will be available to keep the financial system functioning, but at a cost high enough to promote prudent lending and a gentle slowdown in loan growth.
"(This) is a bit of welcome relief inasmuch as it was a short-term solution, but the banks will have to rein in their lending," Tuke said.
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