ADCB to sell bonds worth Dh4.8b

Abu Dhabi: Abu Dhabi Commercial Bank (ADCB) will issue Dh4.8 billion worth of three-year convertible bonds before the end of the second quarter this year.

The bank's general assembly approved the bond issue on Monday.

The convertible bond issue was proposed by the bank's board of directors for the purpose of expanding the capital base and providing the necessary liquidity for the bank's expansion plan.

"We are seeking to double our revenues and profit by 2010 to be in excess of Dh4 billion," Saeed Mubarak Al Hajiri, ADCB chairman, said.

The bank's annual ordinary general assembly meeting approved the proposed dividend of 10 per cent, in cash, or Dh400 million, and 20.25 per cent in bonus shares equivalent to Dh810 million.

"We have already tested the market, and there is a huge demand for our dirham-denominated bonds which will be priced according to the shareholders' best interest," Al Hajiri said.

The proposal of issuing the convertible bond was presented before the extra ordinary meeting to meet the bank's need for strategic long-term partners.

"The amount will add to ADCB's capital, and taking into consideration that our acquisition deal for 25 per cent of RHB Malaysia will be closed in two weeks' time, shareholders will realise the difference very soon," he added.

The bonds will qualify as Tier 1 capital and will be open only for local investors, including the government through Abu Dhabi Investment Council, which already owns 63 per cent of the bank.

"What will determine the government's stance is the strike price and the rate of the coupon, yet we realised strong demand, and expect the conversion price to be 1.25 per cent to 1.75 per cent above Ebor," Al Hajiri said.

ADCB is also planning to launch its Islamic affiliate by the fourth quarter of 2008, namely ADCB Meethaq, in addition to its plans to expand its Islamic products through its commercial arm.

Subprime crisis: Total exposure over Dh1b

ADCB was the only UAE bank to announce subprime-related writedowns worth Dh560 million and expects to writedown an additional Dh100 million this year.

"Our direct and indirect investments related to the subprime mortgage crisis in the US were in excess of Dh1 billion, and we have provisioned 51 per cent of that, while we expect the need to provision Dh100 million in the worst case scenario this year," Saeed Mubarak Al Hajiri, the bank's chairman said.

"At the very worst the provisions can go as high as Dh200 million, but the fact is that some of these assets are still generating income, the problem is the scarcity of liquidity," he added.