UAE banks sink in debt bonds amid an escalating economic crisis
UAE banks are resorting to more debt issuance in light of the escalating economic crisis facing the country.
First Abu Dhabi Bank began marketing Islamic dollar-denominated bonds, tracking down the Dubai Bank, which also issued dollar bonds.
It set the initial price guidance between 100 and 105 basis points on a broker basis.
Wave of borrowing
According to an economist familiar with the matter, the sale of unsecured debt is expected to close on Thursday.
According to the source, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, Islamic Corporation for the Development of the Private Sector, KFH Capital, Al-Ahly Capital and Standard Chartered Bank are the joint selling managers.
UAE banks are joining the wave of global borrowing after collapsing revenues after an unprecedented stimulus from authorities to keep economies afloat during the coronavirus pandemic.
Preceded by Dubai National Bank
Emirates NBD raised $750 million this week in its first dollar bond sale in the Middle East for 2021.
According to Franklin Templeton, gulf governments and companies will issue about $120 billion in Islamic debt this year.
That compares to a record $126 billion last year.
In a disclosure to the Dubai Financial Market, Dubai Bank stated that the bonds were issued on January 6, while these bonds will be listed on January 13 and will mature on January 13, 2026.
A document showed that Dubai Bank had commissioned banks to arrange calls with investors ahead of issuing dollar-denominated bonds worth at least $500 million.
According to the document issued by one of the banks leading the process, the issuance, which has attracted more than $ 2.2 billion in underwriting applications, allows.
Interest rate of 115 basis points above average fixed and variable interest rate swap rates.
The bank used ICBI, ING, Mizuho Securities, and Standard Chartered banks to arrange the issuance process, which will have a maturity of 5 years.
And banks that suffer from liquidity drought seek to issue bonds in the currencies they want to overcome this problem.
Incentive package
Dubai announced a new stimulus package worth 315 million dirhams ($86 million) to help the economy overcome COVID-19 pandemic’s effects.
At the end of last December, Dubai ruler Mohammed bin Rashid approved the new budget, which amounted to 57.1 billion dirhams ($15.55 billion).
The new budget came 6% less than that planned for 2020.
Last year’s budget amounted to 66.4 billion dirhams ($18.8 billion).
Dubai has been affected by the repercussions of COVID-19 pandemic because it depends on tourism and travel as its primary sources of income.
Foreign direct investment in Dubai plummeted 74% in the first half of the year, compared to the same period in 2019.
And recently, rating agencies Moody’s and Standard & Poor’s said that local bank loans to the Dubai government amounted to about 290 billion dirhams ($79 billion).
