Mashreq successfully priced a $500 million additional tier 1 bond offering with a coupon of 7.125 per cent per annum on Monday.
The transaction marked Mashreq’s successful return to the debt capital markets since their last issuance in 2022 and achieved the largest price tightening by any UAE bank for an additional tier 1 issuance in the last five years.
Following a well-attended global investor call and a couple of days of intensive marketing, including a physical roadshow in London, Mashreq decided to open the order books on Monday with initial price thoughts (IPTs) of the high seven per cent area and for a transaction sized at $500 million. Large demand early in the process allowed Mashreq to release a book update of a little less than $1bn, confirming significant momentum and demand from international and regional investors. Mashreq was then able to release guidance moving over 50 basis points inside of IPTs on the back of an orderbook exceeding $2.1 billion at that early stage of the process.
Despite the strong move, the orderbook held firm with minimal drops from both regional and international accounts allowing Mashreq to launch the transaction by setting the yield at 7.125 per cent and pricing the Perpetual Non-Callable 5.5-year additional tier 1 bond offering at a reset margin of +270.5bps. This records the tightest ever margin for Mashreq for a subordinated additional tier 1 or Tier 2 capital issuance while registering the lowest coupon for any UAE bank’s additional tier 1 offering in the last three years.
Mashreq’s group chief executive officer, Ahmed Abdelal, remarked, “We are pleased with the robust investor engagement and support for this strategic transaction. The oversubscription amid a volatile market is particularly gratifying. This transaction will enable Mashreq to continue its growth plans into 2024 and beyond.”
Chairman Abdul Aziz Al Ghurair also congratulated the team on the Mashreq’s most successful capital notes issuance.
The transaction was well distributed across international and regional investors, reaffirming the investor community’s long trust in Mashreq’s credit. The Middle East received the majority of the allocation at 77.5 per cent, while Europe (including the United Kingdom) accounted for 19.5 per cent of the demand. The balance was divided between Asian markets and offshore US interest. Real money demand from private banks and high quality asset managers took the lion’s share of the issuance securing 90 per cent of the allocations. A combination of bank treasury divisions and hedge funds took the rest.
The bookrunners for the issuance were Abu Dhabi Commercial Bank, Al Ahli Bank of Kuwait (DIFC Branch), BofA Securities, Citi, Emirates NBD Capital, First Abu Dhabi Bank, Kamco Investment Company, Mashreq and Mizuho.
Mashreq is rated A by Fitch, A3 by Moody’s and A by S&P, all with a stable outlook,