Abu Dhabi Islamic Bank, a top-tier Islamic financial institution, today announced it has successfully issued the world’s first Shari’a- compliant hybrid tier 1 sukuk and the region’s first publically issued perpetual and tier 1 instrument. This strategic transaction marks a key milestone for the global Islamic finance industry and a major and rare innovation by an Islamic bank.
The USD 1 billion perpetual non-call six-year issue was priced at an expected profit rate of 6.375%, which is one of the lowest rates achieved for any perpetual instrument by a global bank.
The ADIB perpetual Sukuk was well-received by investors, accumulating 330 orders for an order book of over USD 15.5 billion. The result was that, given that the initial Benchmark size of USD 500million was oversubscribed by over 30 times, ADIB decided to take the upper limit of the deal comprising of USD $1 billion.
The issue was driven by broad demand across three regions, with allocations of 38% to Asia, 32% to Middle East, 26% to Europe, and 4% to US Offshore investors. By investor type, the Trust Certificates were sold to private banks which took 60%, Asset and Fund managers bought 26%, commercial banks 11% and other 3%.
Commenting on this strategic transaction, Tirad Mahmoud, CEO of ADIB, said: “I am delighted that ADIB and the region’s first ever hybrid tier 1 issue received extremely strong investor demand from across the Middle East, Europe and Asia. Investors have in particular been impressed by the simplicity of our tier 1 hybrid capital issue, which was structured in a way that was simpler, safer, transparent and mutually beneficial for both investors and our bank. The outstanding success of the issue is a testimony to in ADIB’s strong brand and credit credentials in global capital markets.
"We are proud at ADIB to lead the way in industry best practice and standards setting with yet another successful Shari’a-inspired innovation. The success of this unprecedented transaction in the Middle East will enable the industry to realize the benefits from raising capital through the issuance of hybrid instruments as a cost efficient and non-dilutive capital raising solution that lowers the cost of capital.” Tirad added
“ADIB has always been proactive in complying with new rules and regulations. The new issue designed, among others, to boost Tier 1 capital to comply with Basel III global standards in anticipation of its implementation in the UAE is a testimony to ADIB’s forward- looking approach.” He concluded.
The certificates will be issued by ADIB Capital Invest 1 LTD, a special purpose company, and be listed on the London Stock Exchange. ADIB, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered, were the joint lead managers and book-runners for the offering.