Bank Sukuk – First Abu Dhabi Bank US$800m Sukuk

UAE’s Largest Bank, First Abu Dhabi Bank (FAB), Kicks off International Sukuk Issuance Season with a Benchmark US$800m Sukuk Offering in Early January 2024

Every January, there is a scramble as to which institution will be the first to issue a Sukuk in the international market. Usually, it is a race between the apex banks in the UAE, whether Dubai Islamic Bank, Abu Dhabi Islamic Bank, First Abu Dhabi Bank (FAB), or the major banks in Saudi Arabia.

On 11th January 2024, it was FAB, the UAE’s largest bank in terms of assets, which repeated its first mover advantage of January 2023, by successfully issuing a 5-year US$800 million benchmark Sukuk.

This compared to the January 2023 transaction when FAB issued not one but two benchmark international issuances within a period of 10 days, raising an aggregate US$1.1 billion, comprising 5-year US$500 million RegS Sukuk issuance, which was the first Sukuk transaction in the international market in 2023, followed by a 5.25-year US$600m conventional bond, the first US dollar conventional bond issuance from a MENA financial institution issuer.

FAB had mandated its own Capital market division and Standard Chartered Bank to arrange a series of investors meetings and calls in the UK, GCC, Europe, Asia and with Offshore US Accounts, for the issuance and managing the bookrunning exercise.

They were joined by Dubai Islamic Bank; Emirates NBD Bank; The Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the Islamic Development Bank (IsDB) Group; KFH Capital, and Sharjah Islamic Bank as joint lead managers and bookrunners to the transaction.

The Sukuk, which matures on 23rd January 2029, was issued by FAB Sukuk Company Limited, a special purpose vehicle incorporated in the Cayman Islands, on behalf of the obligor, FAB, under its US$5 billion Trust Certificate Issuance Programme arranged by FAB and Standard Chartered Bank on 5 January 2023, and subsequently update in October 2023.

FAB, which is owned by UAE sovereign wealth fund (SWF) Mubadala Investment Company (37%), the Abu Dhabi ruling family (15.3%) and other UAE entities and individuals (31.6%), is a pacesetter in the GCC Sukuk and bond market with issuance forays into several overseas markets. It has pioneered Sukuk and bond issuances in the Malaysian ringgit, Formosa bond, Eurobond and US dollar markets.

Not surprisingly, Rula Al Qadi, Group Treasurer at FAB, was “thrilled with this successful Sukuk issuance, the first of 2024 and a milestone for FAB. Securing our largest Sukuk in four years and lowest 5-year public issuance spread in two years demonstrates investor confidence in the UAE and FAB’s creditworthiness. We deeply appreciate their continued trust. This Sukuk issuance further strengthens the bank’s position as a leading Islamic finance provider and a trusted partner for investors worldwide.”

Impressive Annual Sukuk Issuance Track Record

This is the fourth consecutive annual benchmark Sukuk issued by FAB. It issued similar US$500 million benchmark Sukuk in January 2021, 2022, and 2023. In addition, FAB also successfully closed its maiden 3-year AED1.3 billion (US$350 million) denominated Green Sukuk issuance in July 2023.

The transaction was launched on 8th January 2024 with the initial price guidance set at around 100 basis points over U.S. Treasuries. Due to robust demand from investors, the final spread for the Sukuk tightened and was set at 85 basis points (bps) over U.S. Treasuries, which according to the Bank was one of its lowest spreads on any US dollar public deal, “demonstrating investor confidence in the bank’s strong creditworthiness,” which resulted in an all-in yield of 4.779% per annum payable semi-annually.

Demand for the US$800 million Sukuk was robust with the order book 1.9 times oversubscribed represented by high quality investors, including international fund managers, supranationals, and banks, with orders from the GCC, Europe, UK, Asia and Offshore US Accounts. The Sukuk certificates are rated AA- by Fitch Ratings and Aa3 by Moody’s Investors Service and application for listing on the main market of the London Stock Exchange is in progress. In line with its objective of promoting investor diversity, the allocation saw 76% directed towards dedicated Islamic investors and 38% towards international counterparts. Amidst a heavy supply in the market, FAB stressed that it executed the deal intra-day with a negative new issue premium.

In comparison, the 5-year US$500 million Sukuk in January 2023 was successfully priced at 90 bps over the U.S. Treasury Rate which is equivalent to a fixed profit rate of 4.581% per annum payable semi-annually in arrears. Similarly, the 5.25-year US$600 million bond in January 2023 was priced at US Treasuries +105bps which resulted in an all-in yield of 4.514%, which says FAB also achieved the lowest spread by any bank globally for a fixed US$5-year conventional bond in 2023.



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