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UPDATE 2-Dubai's Emirates NBD eyeing debut sukuk-CEO
November 28, 2011 / 8:01 AM / 6 years ago

UPDATE 2-Dubai's Emirates NBD eyeing debut sukuk-CEO

* ENBD keeping bond options open, timing key-CEO

* Could confirm banks this week for possible issue - sources

* Bank has issued $500 mln in 2011 in private placements - source

By David French

DUBAI, Nov 28 (Reuters) - Emirates NBD, Dubai’s largest bank by assets, is considering tapping the Islamic bond, or sukuk, market for the first time as the bank becomes the latest Gulf financial institution to target sharia-compliant investors.

Chief Executive Rick Pudner said on Monday the lender is eyeing a five-year, dollar-denominated issue.

“Like everyone, we are looking at the opportunities in the sukuk arena and we’re just reviewing our options,” Pudner told reporters on the sidelines of a company event.

“We are looking at five-year but the size we are not sure. We will determine that over the next week or two weeks.”

Emirates NBD could mandate banks as early as this week, four banking sources had earlier told Reuters.

The sources, speaking on condition of anonymity, said ENBD has drawn up a shortlist of seven or eight banks from which it will select the institutions which will manage the sale.

This list includes National Bank of Abu Dhabi, Standard Chartered, HSBC, Citi, Royal Bank of Scotland and ENBD itself.

“We haven’t mandated any banks yet,” Pudner said. “There were quite a few issues recently so we have decided to wait a little bit and see what the right timing is for going into the market.”

Both conventional and Islamic institutions, as well as global sovereigns such as Bahrain and Indonesia, have been flocking to the sukuk market recently, creating an unusually active fourth quarter.

Both Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank have printed $500 million five-year sukuk in the last two weeks, pricing at a spread over midswaps of 275 basis points and 245 basis points respectively.

Sources said there would be strong regional interest in any print but selling the bank to international investors could be more tricky.

“First and foremost they would have to give a clinical assessment of their loan book and sell it to investors. If they pay up, regional accounts will buy but international accounts will probably pass regardless of the pricing,” said a fixed income fund manager.

“It will be a very good move for the bank to re-establish access and a price point. I think they will probably do a smaller deal followed by a big one later on.”

NO SYRIA SANCTIONS DIRECTIVE YET

Investors will be looking for more information on the impact that Dubai Bank -- which was merged with Emirates NBD in October at the Dubai ruler’s behest -- will have on the bank and how it will be integrated into ENBD.

Emirates NBD has issued around $500 million in privately-placed paper so far in 2011, with all of it sold to European investors, a Gulf-based banking source said.

One of the largest, with an issue date of Nov. 3, was a $163 million two-year bond which priced at 140 basis points over the three-month London interbank offered rate with a 1.832 percent coupon through sole bookrunner Commerzbank.

The quarterly putable bond, which means investors can ask for the cash to be repaid every three months, achieved a good price in the volatile environment, a separate banker said.

In May, Emirates NBD, which has about $2.18 billion in debt maturities in 2012, completed a debt swap for two existing notes due to expire in 2016 for longer-term debt. It has repeatedly said it would not overpay for issuing new debt, and pricing levels so far this year had been too expensive.

When asked about sanctions on Syria by the Arab League, Pudner said: “We haven’t seen any guidance yet. Maybe we will get some in the near future.”

The Arab League approved unprecedented economic sanctions against Syria, isolating President Bashar al-Assad’s government over its eight-month crackdown on protests against his rule.

The sanctions include a travel ban on top Syrian officials and a freeze on assets related to Assad’s government and are aimed at halting dealings with Syria’s central bank and investment in the country.

Emirates NBD shares closed up 1.2 percent on the Dubai bourse on Monday and are up nearly 20 percent this year.

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