By David French and Amran Abocar
DUBAI, March 10 Emirates NBD (ENBD),
Dubai's largest lender, has hired six banks to help arrange a
benchmark-sized subordinated bond sale, four sources familiar
with the plan said, as it seeks to reduce government support for
its capital ratios.
ENBD has hired HSBC Holdings, National Bank of Abu
Dhabi, Citigroup Inc, J.P. Morgan Chase,
Societe Generale and itself for the planned sale, two
of the sources said, speaking on condition of anonymity as the
matter is not public.
ENBD declined to comment.
A successful sale will help the lender, 55.6-percent owned
by state fund Investment Corp of Dubai, repay part of the 12.6
billion dirhams ($3.43 billion) it received from the government
in 2008. The bank said in January that it was looking to begin
repayment of the funds.
The bond is not expected to be launched immediately given
that two other Dubai entities - Dubai Islamic Bank and
Emirates airline - are currently meeting investors
ahead of potential issues.
Benchmark size transactions are at least $500 million.
Banks in the United Arab Emirates will aim to repay Tier 2
capital placed with them at the height of the global financial
crisis this year, with some turning to the bond market to avoid
servicing expensive debt.
The country's Ministry of Finance placed 70 billion dirhams
($19.1 billion) with banks to shore up their balance sheets
after the collapse of Lehman Brothers in September 2008
triggered a seizure of the world's financial system.
The price difference between government bonds, which
contribute to Tier 2 capital, and market prices for new debt is
prompting many lenders to sell bonds to replace the more
ENBD's planned sale follows a similar move by Abu Dhabi
Commercial Bank which raised $1.5 billion from a
two-tranche bond last month, with a subordinated tranche raising
$750 million for the Abu Dhabi lender.
While the government bonds have a 5-percent coupon this
year, rising to 5.25 percent for the final three years, ADCB's
ten-year Tier 2 note carried a 4.5 percent coupon.
ENBD sold a $50 million subordinated bond in a privately
placed debt sale, IFR Markets, a unit of Thomson Reuters,
reported on Wednesday.
The ten-year, non-call five deal, which followed an investor
request to sole bookrunner Commerzbank for Tier 2
paper from a Middle Eastern or Asian bank, was priced roughly 75
basis points above where a standard ENBD bond would come.
Other UAE banks have chosen to use internal cash resources -
at a time of limited loan growth in the country - to pay off the
government cash: ADCB, First Gulf Bank and Union
National Bank repaid a combined 10 billion dirhams last