Bank Dhofar successfully priced their US$300 million Additional Tier 1 Perpetual Non-Callable 5 year bond transaction, which represents the first Basel III compliant Additional Tier 1 instrument from Oman, highlighting the underlying credit strength of Bank Dhofar.
Bank Dhofar’s debut transaction, which has been approved as fully eligible Additional Tier 1 Capital by the Central Bank of Oman (“CBO”) under its Basel III framework, was well received by both regional and international investors, with the orderbook closing in excess of US$800 million, representing an oversubscription in excess of 2.7 times. As a result, the transaction represented the highest oversubscription rate for a USD Additional Tier 1 bond from the GCC in the last 12 months. The issuance followed an extensive series of investor meetings across Asia, the Middle East and Europe.
BankDhofar’s Acting CEO Abdul Hakeem Omar Al Ojaili said in a statement: “To support our growth, the Board and Shareholders approved to evaluate number of options for capital raising. We successfully obtained the necessary approvals from the regulatory authorities and issued US$300 million of Additional Tier 1 capital securities in a landmark transaction for both Bank Dhofar and Oman. We are very pleased with the outcome and expect that this transaction will better position the Bank for future growth.”
The securities, which priced at 100%, will bear interest at a rate of 6.850% which will reset on 27 May 2020 (the First Call date) and every 5 years thereafter to a new fixed rate equal to the sum of the prevailing 5 year Mid Swap rate and the initial credit spread of 512.8bps.
Orderbooks opened on 19 May during Oman morning, with initial pricing thoughts of a yield of 7.000% area. Following the positive response from investors, further guidance was shared three hours later, reflecting an orderbook of over US$400 million. Leveraging the sustained momentum in the transaction, a final update was shared, revising price guidance to a yield of 6.850-6.900%.
Ultimately, Bank Dhofar was able to successfully price the transaction on the same day at the low end of final price guidance, at a yield of 6.850%, with a final order book in excess of US$800 million.
The transaction reflects Bank Dhofar’s debut transaction in the international debt markets as well as the country’s first USD-denominated Basel III-compliant Additional Tier 1 issuance.
The issuance achieved a balanced distribution, with over 96 accounts participating. The book was driven by broad demand internationally, with strong interest shown across European and Asian investors, Fund Managers, international Private Banks and other Financial Institutions. In terms of allocations, 44% went to the Middle East, 21% to Asia, 33% to Europe, and 2% to US Offshore investors. By investor type, the split was 46% to banks and private banks, 28% to fund managers and 26% to agencies, pension funds and insurance companies.
National Bank of Abu Dhabi and Standard Chartered Bank were appointed as Joint Global Coordinators and Emirates NBD Capital, National Bank of Abu Dhabi and Standard Chartered Bank as Joint Lead Managers on the transaction