Emirates NBD plans to tap dollar bond market

Dubai: Emirates NBD, the UAE's largest bank in terms of assets, yesterday announced that it has appointed lead managers and book runners for its upcoming dollar denominated bond issue.

The bank said in a statement that it has mandated Bank of America Merrill Lynch, Deutsche Bank, Emirates NBD Capital, HSBC and National Bank of Abu Dhabi, as joint lead managers and joint bookrunners.

Sources close to the issue said the issue will be benchmark sized for more than $500 million (Dh1.83 billion). The bank said the new bond issue will be part of its $7.5 billion Medium Term Notes (MTN) programme.

The latest bond issue is Emirates NBD's third this year. Emirates Islamic Bank, its Islamic banking subsidiary, sold a $500 million sukuk in January followed by the bank's one billion yuan bond issue earlier this month.

Initial guidance for the latest bond was given in the area of 337.5 basis points over midswaps.

Refinancing

Analysts expect a general shortage of liquidity for Gulf firms facing large refinancing requirements this year as many western banks faced with deleveraging and balance sheet repair will be absent from the market.

To address the issue on a long-term basis, rating agency Moody's said the region should look at improving the size and sophistication levels of local banks while diversifying their funding sources to Asian and US banks and increasingly using debt markets for long-term funds where possible.

Based on the vulnerability to the funding gaps, Moody's has categorised the Gulf banking systems into three categories. While Saudi Arabia, Oman and Kuwait fall into the low vulnerability category with their reliance on European bank financing around 10 per cent of GDP, the UAE and Qatar face moderate levels of vulnerability, according to Moody's assessment. The UAE economy, particularly Dubai, has a significant reliance on foreign funding.

The withdrawal of European banks would leave a significant funding gap in the local economy and new financing strategies and funding sources would need to be found, Moody's said.

Maturities

Emirates NBD has more than Dh8 billion in debt maturing this year, including $1.5 billion due in October.

The bank said last month that the upcoming maturities are within its funding capacity.

The bank reported a net profit of Dh2.48 billion for 2011, up 6 per cent compared with Dh2.33 billion reported in 2010.

The bank, going through the integration of the newly-acquired Dubai Bank is reportedly slashing its workforce by about 700 people as part of a plan to reduce costs.