By Dinesh Nair
DUBAI, April 2 Commercial Bank Of Qatar
(CBQ), which is buying a majority stake in Turkish
lender Alternatifbank, has picked two banks for a
potential bond sale to boost its core capital, sources said.
The sale of a capital-boosting bond, a rare move in the
Gulf, would help assuage analysts' concerns over CBQ's capital
position which have been exacerbated by its recent agreement to
buy the controlling stake in Alternatifbank.
CBQ, the Gulf state's third-largest bank by market value,
has hired Morgan Stanley Inc and Bank Of America Merrill
Lynch for the issue of a Tier 1 bond, two sources
familiar with the matter said, speaking on condition of
anonymity as the matter is not public.
CBQ declined to comment.
Tier 1 capital is the main measure of a bank's financial
strength and Gulf banks will eventually be expected to comply
with tighter Basel III global standards for Tier 1 ratios, which
will be gradually introduced over the coming years.
The sale of capital-boosting bonds is still rare in the Gulf
but the trend has been growing in recent months with two
UAE-based lenders, Abu Dhabi Islamic Bank and Dubai
Islamic Bank selling sharia-compliant Tier 1 debt to
shore up their capital ratios.
CBQ has never sold a Tier 1 bond before but completed a $600
million ten-year Tier 2 bond in 2009 as part of a $1.6 billion
two-part offering which, at the time, was the largest ever issue
from an emerging market financial institution.
One of the sources said CBQ was aiming to sell a
benchmark-sized bond, which is typically at least $500 million
Dubai-based brokerage Arqaam Capital said in a March 26 note
that the bank would need to raise fresh equity of about 4.8
billion Qatari riyals ($1.32 billion) in order to address its
weak capital base. The broker expects CBQ to raise the capital
through a combination of a Tier 1 bond sale and a rights issue.
In March, CBQ agreed to buy a 70.8 percent stake in
Alternatifbank, valued at $460 million based on Alternatif's
book value of $328 million at the end of December. The final
price will be based on two times the Turkish lender's book value
as at June 30, 2013, the bank has said.
In the Gulf region, CBQ owns a near-35 percent stake in
National Bank of Oman and 40 percent in United Arab