NBAD Launches 500 Million Malaysian Ringgit Sukuk
The National Bank of Abu Dhabi (NBAD), the Number One Bank in the UAE, successfully issued its first Sukuk (Islamic bonds) and first issuance denominated in Malaysian ringgit (MYR).
The groundbreaking issuance is worth 500 million ringgit (US$155.9 million or AED 572.5 million) and is issued under NBAD’s MYR MTN programme. The offering received extremely strong investor demand and was oversubscribed nearly four times, showing the appetite of investors for NBAD's credit risk.
The transaction had a strong distribution across a wide investor base with a breakdown of fund managers 48.3%, insurance companies 21%, financial institutions 19.9%, government agencies 8.6%, and other corporations 2.2%.
The 5-year Sukuk has a coupon of 4.75%. HSBC Bank Middle East and Malaysia’s Maybank were the joint lead managers and the bookrunners in this transaction.
This transaction further diversifies NBAD’s funding sources and allows the Bank to tap into a whole new segment of investors.
“We are delighted with the outcome; we consider our MYR issuance a major breakthrough because it helps us introduce a new group of investors to NBAD, investors who would not have been able to participate in our recent EMTN issuances because of their investment guidelines and currency restrictions,” said Mahmood Al Aradi, the Senior General Manager of NBAD’s Financial Markets Division
Mr. Al Aradi continued, “It is also a creative avenue as it is our first ever Sukuk issuance, a specifically designed format of financing that meets the strict investment guidelines of some of the Islamic asset managers and pension funds based in Malaysia and Asia. All this fits in perfectly well with our medium term strategy of diversifying our funding sources and extending the duration of our liabilities.”
Furthermore, the transaction serves as a trend-setter. “We believe this will now open the door for other issuers from our part of the world to tap this unique liquidity pool and strengthen further the links that have been established with the Asian investor base,” Mr. Al Aradi said.
Until now, NBAD has successfully issued debt under its EMTN platform to raise funds, which has been cost-effective and efficient. However, NBAD’s inaugural issue of a Sukuk in MYR shows the Bank’s issuance flexibility to meet investors' specific demands.
“Considering the huge pool of Islamic asset managers and pension funds in Malaysia, we opted to broaden our reach and come up with a suitable product, which meets their needs,” Mr. Al Aradi explained.
- Twist of fate: Middle East fund managers shy away from Turkey, warm up to Egypt
- 'Let them eat cake'...or in the case of Egyptians, shall we say 'pasta'?
- In flux: What's up with Dubai's stock market?!
- GCC banks could face capital and liquidity shortfall
- It's time for an interest rate war in emerging markets, and here's why Middle Eastern economies should take part