Ahli United Bank (AUB) and International Finance Corporation (IFC) capitalisation fund have signed key agreements to back capitalisation and expansion plans of the Bahrain-based bank by investing $125 million in equity and $165 million in subordinated debt.

The agreement will also see the maturity date of the existing $200 million subordinated loan raised in 2006 extended from 2016 to 2018, thereby increasing its capital effectiveness for AUB.

IFC Capitalisation Fund's investments in AUB will provide long-term capital resources to the bank as it expands regionally, and will strengthen its capital funding base in anticipation of the Basel III requirements coming into effect in 2013.

The IFC and the IFC Capitalisation Fund aim through these investments which represent the IFC Capitalisation Fund's first in the Mena region to fulfil their mandate in supporting banks deemed vital to the financial system of emerging markets and to facilitate and promote greater regional economic and financial integration.

"AUB is very pleased to expand and diversify its banking partnership with IFC and the IFC Capitalisation Fund in a landmark capital raising transaction which will have a major impact on its regional growth and business development. IFC has proved to be a reliable strategic partner especially in these challenging times," said AUB group CEO and managing director Adel El Labban.

"This deal is unique and distinctly significant in more ways than one. In size, it represents the largest investment by any international body in a financial institution anywhere in the region," El Labban remarked.

"In timing, it comes as a strong vote of confidence by the international financial community in the soundness, strong fundamentals and future outlook not only of AUB but of the financial sector in Bahrain and the region at large in these challenging times," he stated.

"More significantly, this deal demonstrates AUB's success in mobilising capital funding at optimal cost and in structuring a sophisticated mix of Tier I and Tier II capital, in a manner similar to its major OECD counterparts," El Labban said.

"The Capitalisation Fund's investments will support AUB during a challenging time for markets in the Middle East and North Africa region," remarked Marcos Brujis, who heads the IFC Capitalisation Fund.

"We look forward to facilitating the bank's expansion and growth throughout the region," he noted.

"The expansion of AUB will support trade, financial flows, and provide access to finance for underserved segments of society in the region's frontier and emerging countries," said Rashad Kaldany, IFC vice-president for Asia, Eastern Europe, Mena.

"IFC and IFC Capitalisation Fund's support for a regional champion and long-standing partner in development like AUB demonstrates our confidence in the fundamentals of economies in the Mena region," he added.

The IFC Capitalisation Fund is a global equity and subordinated debt fund founded by the International Finance Corporation, a member of the World Bank Group, and the Japan Bank for International Co-operation. It aims to support banks considered vital to the financial system of emerging market countries.-TradeArabia News Service