First Abu Dhabi Bank (FAB), one of the GCC’s largest financial institutions, returned to the Sukuk market with a benchmark US$500 million Sukuk with a tenor of 5 years. The Sukuk was launched in December 2020 and completed in early January 2021.
The Sukuk, which matures in January 2026, 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$3.5 billion Trust Certificate Issuance Programme, arranged by FAB and Standard Chartered Bank on 5 January 2021. The deal, according to the Bank, is FAB’s first US dollar benchmark offering and the first Sukuk issue globally in 2021. FAB issued a similar 5-year US$500 million Sukuk in January 2020.
FAB had mandated its own Capital Markets division and Standard Chartered Bank to arrange a series of virtual investors meetings and calls for the issuance and manage the bookrunning exercise. Dubai Islamic Bank, Emirates NBD Bank, The Islamic Corporation for the Development of the Private Sector, KFH Capital Investment Company, and NCB Capital Company joined as distributors.
This latest issuance is the lowest-ever yield on any five-year MENA bank US dollar issuance priced at Mid Swaps (MS) +90 basis points (bps) (all-in yield of 1.411% per annum payable semi-annually).
This offering, said FAB, “was highly successful” attracting a total orderbook of circa US$1.5 billion which represents a three times over-subscription rate. The deal also attracted high quality Islamic and conventional investors from the Middle East, Asia, UK and Europe.
Rula Al Qadi, Managing Director & Head of Group Funding at FAB maintained that “coming in the first week of January, we managed to take advantage of market conditions and print a deal roughly 20bps inside our curve. 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.”
Indeed, pricing on the deal at MS+90bps, she added, represented a negative new issue premium when compared to FAB’s January 2025 maturity Sukuk issued in 2020 which was trading at MS +104bps on the day of deal announcement. “This resulted in FAB printing the lowest-ever yielding Five-Year US dollar bank paper from MENA. The Sukuk was placed to a diversified investor base of which 53% was international and 47% was regional. The placement to Islamic investors was 76% signifying FAB’s appeal to Sharia-compliant liquidity pools globally.”
The Sukuk asset pool comprises 57% tangible assets and 43% Murabaha proceeds. FAB is rated AA-, Aa3, AA- by Fitch Ratings, Moody’s Investors Service and S&P Global Ratings, 57 per cent.
FAB, which is owned by 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. In early January 2021, for instance, in addition to the US$500 million Sukuk, FAB issued the year’s first Chinese Yuan (CNY) in the Formosa bond market with a CNY1.5 billion Five-Year bond at 3.15% per annum – a deal which represented the lowest coupon paid by a MENA bank on a public CNY five-year issuance.
FAB is also eying the Indonesian market having just opened a representative office in Jakarta. According to André Sayegh, Group Chief Executive Officer “our new representative office in Jakarta follows our Group’s international growth strategy and will support our clients, the UAE, wider GCC and Egypt’s international trading ties. As the largest economy in South-East Asia and a strategically important trading partner for our region, Indonesia is a growing destination for UAE investment abroad, and one with great future potential. Through our representative office, FAB will support and further enhance bilateral trade and economic relations.”
The regional office, will also complement the activities of the bank’s wholesale branch in Singapore and support will support FAB customers with interests in Indonesia, build relationships with public and private sector organisations and correspondent banks in Indonesia, connect top-tier corporate and financial institution clients in Indonesia interested in conducting business in the UAE, GCC and Egypt, and facilitate government-to-government strategic partnerships and initiatives.