ADIB to sell $1bn in debut sukuk
Abu Dhabi, November 8, 2012
Abu Dhabi Islamic Bank, the emirate's largest sharia-compliant lender, launched a $1 billion sharia-compliant hybrid Islamic bond, or sukuk, on Thursday to boost its core capital, arranging banks said, after attracting strong demand.
The Tier 1 perpetual sukuk, which has no defined maturity date, was launched at a profit rate of 6.375 percent, at the tighter end of revised guidance, after orders totalled over $15 billion.
The demand for the deal, despite its rare and unusual structure for a Middle East issuer, indicates that ADIB offered enough of an incentive to reel in investors, and more such bonds from the region may follow its lead.
Gulf banks will eventually be expected to comply with tighter Basel III global standards for Tier 1 capital, which will be gradually introduced over coming years.
Earlier this month, the Kuala Lumpur-based Islamic Financial Services Board (IFSB) released new draft guidelines on capital adequacy for Islamic banks, although national financial regulators have the final say on how they apply these.
Several features of the ADIB sukuk qualify it more as an equity instrument than a plain vanilla sukuk, which is usually classified as senior debt.
The sukuk will be classed as deeply subordinated, with proceeds used to strengthen ADIB's Tier 1 - or core - capital rather than booked as a liability on its balance sheet.
ADIB's sukuk is callable at year six, according to an investor presentation seen by Reuters, and on every periodic distribution date after that. It will carry a fixed profit rate of six-year midswaps over the initial margin.
ADIB shareholders approved the capital-boosting measures at a meeting last month. The bank had a Tier 1 capital ratio of 13.45 percent at the end of June 2012 and said in its second-quarter results that it aimed to raise this to above 15 percent in the near term.
ADIB shares closed 0.9 percent lower on Thursday, but are trading just over 5 percent higher year to date.
ADIB itself, HSBC Holdings, Morgan Stanley Inc , National Bank of Abu Dhabi and Standard Chartered Plc arranged the deal. - Reuters
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