BankMuscat launches 10-year corporate bond issue
BankMuscat has announced the launch of a10-year corporate bond. The bonds will be listed on the Muscat Securities Market. The issue nominal value per bond is one omani rial ($2.59) and the issue price is OR 1.020 and it carries a coupon of seven percent that is payable semi-annually with the bond having a term of 10 years.
The bond issue is available to local and expatriate investors throughout the Gulf Cooperation Council (GCC). The issue is now open for investors with the issue closing on June 18. Maturity date for the bond is June 18, 2013.
Explaining the rationale behind setting the interest rate, Chief Executive of the bank Abdulrazak Ali Issa stated that: “As per our internal analysis, based on our rating and tenor of the bonds, the ten year rate should be approximately 6.4 percent to 6.5 percent. This rate was confirmed by a pre-marketing exercise. We however decided to offer a slightly higher rate to attract more retail and overseas investors. The higher coupon of the bond could thus be attributed to innovation cost. If you have to attract investors to new instruments, you have to pay a higher cost. Ultimately, market forces would help find the correct price on the market and we expect further issues to be at lower coupons.”
BankMuscat had issued OR 40 million of 10 percent Subordinated Loan bonds in 2000 and OR 27 million of 8.5 percent Compulsory Convertible bonds in 2001. These are listed on the Muscat Securities Market and have been actively traded in the market.
BankMuscat’s financial strength has been confirmed by leading international ratings agencies. Moody’s has rated the paper Baa3 while Fitch has granted a BBB rating to the bond. Moody’s has granted a Baa2 rating to the Government of Oman. Thus BankMuscat is rated one notch below the sovereign rating. — (menareport.com)
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