Abu Dhabi Commercial Bank PJSC may sell five and 10-year bonds this week, according to three bankers familiar with the plan, as the third-biggest United Arab Emirates lender seeks to benefit from near record-low yields.
The state-controlled lender may price benchmark-sized, senior five-year notes at about 180 basis points, or 1.8 percentage points, over the benchmark midswap rate, said the bankers, who asked not to be identified because the information is private. The 10-year subordinate bonds may price in the high 200 basis-point range over the midswap rate, the bankers said. A benchmark-sized issue raises at least $500 million.
Abu Dhabi Commercial’s bond plan follows Abu Dhabi National Energy Co., a state-controlled power and oil company, which raised $2 billion from the sale of dollar-denominated debt in December. National Bank of Abu Dhabi PJSC, the U.A.E.’s second-biggest lender by assets, plans to seek shareholder approval next month for the sale of $500 million of convertible bonds.
U.A.E. issuers are tapping the market to benefit from a drop in borrowing costs. Dubai’s government last month sold $1.25 billion of bonds, with the yield on 10-year securities dropping 40 percent from its last issue. The average yield on bonds sold by banks in the six-nation Gulf Cooperation Council bonds fell 80 basis points in the past year to 2.56 percent on Feb. 22, according to the HSBC/Nasdaq Dubai GCC Conventional Senior Financial Services U.S. Dollar Bond Index.
Abu Dhabi Commercial’s $500 million of 4.071 percent notes due November 2016 traded at 148 basis points over the midswap rate on Feb. 22, according to data compiled by Bloomberg. The bank is rated A, the sixth-highest investment grade at Standard & Poor’s. The yield on those notes dropped to a record 1.96 percent on Jan. 22 and was 2.26 percent at 4:45 p.m. in Dubai.
Issuers from the GCC sold a record $43 billion of bonds last year, according to data compiled by Bloomberg. Bond sales from the region have raised $4 billion so far this year.
Barclays Plc, ING Groep NV, JPMorgan Securities, National Bank of Abu Dhabi PJSC, Royal Bank of Scotland Group Plc and ADCB are managing the sale, the bankers said.