FAB raises $500m through lowest-priced Mena sukuk issuance by a bank

The pricing reflects strong fundamentals of the lender and the UAE economy

Abu Dhabi, United Arab Emirates, December 15, 2020.  FAB (First Abu Dhabi Bank) building along Khalifa Bin Zayed The First Street.
Victor Besa/The National
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for:  Stock

First Abu Dhabi Bank, the UAE's biggest bank by assets, raised $500 million through a benchmark sukuk, the first global Sharia-compliant bond offering of the year, as it continues to diversify its funding base.

The deal closed with the lowest ever yield on a five-year dollar-denominated sukuk by a Middle East and North Africa bank, FAB said in a statement on Monday. Issued through FAB Sukuk Company, the lender sold the bonds at 90 basis points over mid-swaps, or an all-in yield of 1.411 per cent.

Pricing on the deal represents a “negative new issue premium” when compared to FAB’s January 2025 maturity sukuk, which was trading at 104 bps over mid-swaps at the time of the deal.

“Coming [to the market] in the first week of January, we managed to take advantage of market conditions and print a deal roughly 20 bps inside our curve,” Rula Al Qadi, managing director and head of group funding at FAB, said.

"Once again, we had tremendous support from investors globally – both Islamic and conventional – which is testament to FAB’s strong credit fundamentals and the overall positive view of Abu Dhabi and the UAE economy by international investors.”

Corporates, financial institutions and sovereigns across the world have tapped debt capital markets in recent months, taking advantage of low interest rates globally. Central banks have pushed interest rates near or below zero to support businesses and their economies amid the pandemic, giving issuers a chance to beef up their cash buffers and diversify their funding base.

The sukuk, FAB’s first US debt issuance of 2021, garnered strong investor interest as it was three times oversubscribed, with the order book swelling to about $1.5 billion, FAB said.

It attracted both conventional and Sharia-compliant investors from the Middle East, Asia, the UK and Europe and was subscribed 53 per cent by international and 47 per cent by regional investors. The placement to Islamic investors was 76 per cent, underlining “FAB’s appeal to sharia-compliant liquidity pools globally”, the bank said.