Business | Banking

First Gulf Bank sukuk 2.8 times oversubscribed

Listed in London, bonds retain 4.046% fixed profit rate

  • By Saifur Rahman, Business Editor
  • Published: 00:00 January 13, 2012
  • Gulf News

  • Image Credit: Oliver Clarke/ Gulf News Archive
  • A First Gulf Bank branch in Dubai. The bank announced that its $500 million sukuk fetched $1.4 billion on closing.

Abu Dhabi: Abu Dhabi-based lender First Gulf Bank (FGB) yesterday said its $500 million (Dh1.83 billion) sukuk has been oversubscribed 2.8 times to fetch $1.4 billion (Dh5.14 billion) on closing.

Led by FGB, Citi, HSBC, NBAD and Standard Chartered banks, the transaction set the final price for the five-year sukuk at 287.5 basis points above mid-swaps. Rated A2 (Stable) by Moody's and A+ (Stable) by Fitch, the Regulated S Bonds are listed in London and retain a fixed profit rate of 4.046 per cent per annum. Proceeds from the sukuk are to be used for general corporate purposes.

Andre' Sayegh, CEO of First Gulf Bank, said: "The positive response we have received for this transaction clearly reflects the trust that investors have in our bank and in our strong fundamentals and ability to provide sustainable returns to our shareholders. This is our second sukuk transaction, and we have witnessed overwhelming responses in both times from investors in the Middle East, Europe and Asia."

Positive outlook

With investor confidence growing, the region is expected to see an increase in the issuance of sukuks.

Mohammad Dawood, managing director of Islamic global markets, EMEA, HSBC Amanah, said, "We expect a significant increase in sukuk issuance this year because it performed well against the financial crisis and liquidity crunch in 2011. The sukuk market is already off to a strong start in 2012. This January is the busiest we've seen this market. Demand still outstrips supply."

The break-up of sales was allocated to different locations, with 69 per cent of investors based in the Middle East, 15 per cent from Europe, and 16 per cent from Asian markets.

Sayegh added: "Carried out alongside our joint lead managers, the transaction carried the total subscription value of $1.4 billion. The proceeds will be used for general corporate purposes and to enhance our services and continue to diversify our funding base and our offerings." The transaction was divided between commercial and investment banks (72 per cent), fund managers (18 per cent), private banks (7 per cent) and insurance and pensions (3 per cent).

"Islamic finance is an ideal bridge for capital flows between Asia and the Middle East but to encourage more Asian sukuk issuances, there is a need to help Middle Eastern investors understand Asian sukuk and capital markets better," Rafe Haneef, managing director of Islamic global markets, Asia, HSBC Amanah, said.

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