First Abu Dhabi Financial institution has mandated a bunch of world and regional banks to rearrange investor calls on Wednesday, 19 November, signalling the preparation of a benchmark USD-denominated Further Tier 1 capital issuance. The Abu Dhabi-based lender, rated Aa3 by Moody’s and AA- by each S&P and Fitch, is focusing on a fixed-rate, resettable perpetual instrument with a non-call six-year construction, anticipated to be rated Baa3 by Moody’s, topic to market circumstances.
FAB has appointed Abu Dhabi Business Financial institution, Barclays, Emirates NBD Capital, itself, HSBC and Commonplace Chartered Financial institution as joint lead managers and bookrunners for the issuance, reflecting a powerful syndicate backing. In accordance with institutional-market briefings, the interval of investor calls is meant to gauge pricing, demand, and issuance dimension forward of launch.
This transfer marks FAB’s first benchmark AT1 issuance in roughly 5 years and comes because the financial institution seeks to bolster its capital buffer amid evolving regulatory expectations. Market-specialist commentary notes that such securities serve a twin goal: offering everlasting capital that counts in direction of Tier 1 regulatory ratios whereas providing issuers the flexibleness of a name possibility after a set interval — on this case six years — to redeem, topic to sure circumstances.
FAB’s prior issuance of a senior inexperienced bond earlier this month — a €850 million deal priced at mid-swaps plus 70 foundation factors after opening at plus 100 foundation factors — underlined its readiness to entry capital markets. That deal illustrated investor urge for food for the financial institution’s funding devices and the financial institution’s willingness to faucet numerous devices and jurisdictions. The proposed AT1 issuance broadens FAB’s capital-raising toolkit additional.
In assigning an anticipated score of Baa3 by Moody’s for the proposed challenge, the financial institution is successfully focusing on the bottom investment-grade class from that company for this stage of instrument. Such rankings replicate the subordinated nature of AT1 securities; they rank decrease than senior debt within the creditor hierarchy and sometimes incorporate options resembling coupon discretion and loss-absorption mechanisms — components that carry larger credit score threat for traders in comparison with senior bonds.
Rising-markets commentators word that demand for Gulf-region AT1 securities has been comparatively scant over the previous yr as traders have weighed macro-economic headwinds, rising interest-rate environments and regulatory changes. The Gulf area’s complete main issuance of bonds and sukuk for the primary quarter of the yr was reported at USD 51.5 billion, down from USD 55.5 billion in the identical interval a yr prior; inside this, financial-institution capital devices fashioned a subset of exercise. However, choose banks proceed to faucet issuance home windows that align with investor sentiment.
For FAB, the timing seems strategic: the financial institution’s frequent fairness Tier 1 ratio stands at 13.7 per cent — a determine comfortably above its inner threshold of 13.5 per cent however decrease than the 14.3 per cent recorded a yr earlier. This means room for issuing capital-absorption securities like AT1 to bolster buffers with out triggering market concern. Regulatory adjustments additionally loom: UAE banks are on account of face a 50-basis-point improve within the counter-cyclical buffer subsequent yr, which can elevate complete capital necessities and heighten the capital-management crucial.
Investor calls scheduled on 19 November are anticipated to cowl structuring choices, timing of launch, goal dimension and investor syndication. Preliminary market commentary anticipates that FAB could goal for a headline dimension within the area of USD 750 million — in keeping with its final AT1 benchmark in 2020 — though exact sizing will hinge on demand and market dynamics.
The joint bookrunners assemble a powerful world footprint: Barclays, HSBC and Commonplace Chartered present world investor entry whereas Emirates NBD Capital and Abu Dhabi Business Financial institution supply regional distribution power. That displays FAB’s twin goal of tapping each GCC-based and worldwide institutional traders. Market observers consider that if oversubscription builds, pricing might tighten relative to preliminary steerage and the syndicate could think about rising sizing accordingly.