DUBAI - Dubai Islamic Bank, the United
Arab Emirates' largest Islamic lender, on Thursday sold $1 billion in
Additional Tier 1 sukuk, or Islamic bonds, at 4.625%, a document from one of
the banks arranging the deal showed.
Overall debt issuance from the Gulf so
far this year has already surpassed last year's total, again topping $100 billion
and setting a new record as borrowers - especially governments - seek to
bolster their finances amid the coronavirus crisis and weak oil prices.
Several more debt sales are expected
before year-end, banking sources said.
DIB began marketing the notes at
around 5.25% earlier on Thursday and received over $5.5 billion in orders for
the debt sale, the document showed.
"Very tight pricing, coupled
with a 5-1/2-times oversubscription, indicates high interest from investors as
they lack alternative shariah-compliant instruments, in which there has been a
long mismatch between supply and demand," a fixed income strategist said.
Additional Tier 1 (AT1) bonds, the
riskiest debt instruments banks can issue, are designed to be perpetual in
nature, but lenders can call them after a specified period.
Other banks in the UAE, including
First Abu Dhabi Bank, Emirates NBD and Commercial Bank of Dubai have also sold
AT1 bonds this year as they seek to shore up their Tier 1 capital as they book
higher loan loss provisions amid the coronavirus crisis.
The sukuk's first call date is in May
2026. The profit rate will reset in November 2026 based on a correlation with
six-year U.S. Treasury swaps and will reset every six years thereafter.
The deal was arranged by Dubai Islamic Bank, Emirates NBD
Capital, First Abu Dhabi Bank HSBC, Sharjah Islamic Bank, and Standard
Chartered.