Bank Muscat launches RO 25 million 6.25% fixed rate 10-year bond issue
BankMuscat (SAOG), the largest bank in the Sultanate of Oman, has launched a RO 25 million 6.25% fixed rate 10-year bond issue. Open to institutions, GCC and other nationals, the BankMuscat bond issue follows closely on the heels of the Bank’s first issuance of USD 250 million of its US$ 800 million EMTN programme that found encouraging response from the international investor community, earlier this year.
The BankMuscat 6.25% bond issue also follows the response for its 7% fixed rate bond issued last year where collections exceeded RO 170 million against an issue size of RO 15 million (with possibility to retain up to RO 25 million) from investors across the region.
Commenting on the investment climate within the GCC today, AbdulRazak Ali Issa, Chief Executive, BankMuscat said: “The success of our 7% bond issue last year and our recently concluded first issuance of Euro-bonds proves without a doubt that the GCC investing community is looking for good investment opportunities within the region. Today, I am firm in my belief, that there is a definite market for long-term funds in the region. I am also extremely glad to find both the international and regional financial and investor community ready to consider investments in Oman.”
The public issue of BankMuscat 6.25% fixed rate bonds is expected to raise RO. 25 million with the Bank having a green-shoe option to retain an additional RO.10 million, subject to necessary approvals. The issue opens to investors on 16 June 2004 and closes on 30 June 2004. The minimum investment size is only 100 bonds and in multiples of 100 thereafter. The par value of the bond is Rial Omani one and the issue price is one rial and twenty baizas. Like the previous bonds these fixed rate bonds will be listed on the Muscat Securities Market (MSM) upon completion of the issue.
Speaking on the current offering, AbdulRazak said: “The current bond issue is another attempt from BankMuscat to provide investors across the region with a handsome investment opportunity. The 6.25% coupon is our way of providing the international and regional investor community with an assurance of stable returns in the midst of a volatile interest regime and reducing investment opportunities.
“The funds raised through the current bond issue will help the Bank better manage the maturity mismatches in its balance sheet and provide long-term funding in Rial Omani for upcoming privatization projects in the Sultanate. BankMuscat is committed to partnering the Government of Oman in projects that directly or indirectly help in the strengthening of the Omani economy and the GCC region as a whole”, he added.
Moody's Investors Service has assigned a Baa3 long-term domestic currency debt rating to the BankMuscat 6.25% fixed rate bonds that are due to mature in 2014. The Baa3 global domestic currency rating is placed at the same level as the Baa3 foreign currency deposit rating already assigned to BankMuscat.
Moody's has noted that the existing ratings for BankMuscat (Baa3/Prime-3 for long- and short-term foreign currency deposits and D+ for financial strength), reflect the bank's good franchise in its domestic market as the biggest bank in Oman, with a market share of more than one third of total banking assets. Furthermore, the ratings take into account the bank's adequate financial performance, including earning power, adequate capital position and improving asset quality indicators.
International rating agency Fitch, on the other hand, has assigned a ‘BBB’ long-term rating to the Rial Omani 25 million 6.25% fixed rate bonds.
Explaining the rationale behind the banks attempt to launch long-term bonds in the market, AbdulRazak said: “Prior to the year 2000, the deposits market in Oman was heavily tilted towards the shorter end with deposits rarely kept for more than one year. This changed with the issuance of the BankMuscat Certificates of Deposit (CD) with a maturity period of 3 years in the year 2000. Since then, the Bank has been successful in mobilizing CDs in excess of RO. 95 million with a maturity profile of 3 years to 5 years. Other banks in Oman have followed our path and have raised substantial amounts of money through the CD route. While this has resulted in the development of the 3 to 5 year debt market it Oman, we would now like to achieve the same at the longer end of the yield curve. The 6.25% fixed rate 10-year bond issue will help further develop the market that we set out to create last year.”
BankMuscat recorded a net profit of 27.1 million for the year ended December 2003. The Bank has seen a significant surge in its profits during the first quarter of 2004, which rested at RO 7 million. Net interest income has grown by 7% to RO 18.6 million and non-interest income by 7% to RO 4.5 million as of March 31,2004. Operating profit at RO 13.1 million has increased by 9% and operating expenses by 4% to RO 9.9 million during the period in question. (menareport.com)
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