UAE's top bank to debut in euro market amid Gulf bonds deluge

DUBAI: First Abu Dhabi Bank (FAB) , the biggest lender in the United Arab Emirates, is planning a debut euro-denominated bond issuance, a document showed on Monday, the latest Gulf issuer to raise capital amid a downturn caused by the COVID-19 pandemic.

Borrowers in the oil-dependent region have been tapping global debt markets at cheap rates this year as abundant global liquidity pushes investors to hunt for higher-yielding assets.

FAB has already tapped the market several times this year, including with a sterling-denominated deal last week and the region's first green bonds denominated in Swiss francs last month.

It is now looking to issue its first euro-denominated bonds, expected be benchmark in size, which generally means worth at least $500 million, according to a document issued by one of the banks leading the deal.

Issuance from the Gulf this year began contrary to the usual trend. "Junk"-rated Oman - which struggled with a bond deal in October - led the charge in mid-January, and Bahrain, the only other sub-investment-grade Gulf sovereign, followed less than a week later.

Regional borrowers are also helped by an upbeat market view of economic recovery from the pandemic, bankers say.

The low yields on several recent deals "do not offer much upside in terms of carry and future capital gains," but will help make issuers' debt more sustainable in the medium term, said Raffaele Bertoni, head of debt capital markets at Gulf Investment Corporation .

"Companies can take advantage of the current depressed rate environment to put in place the necessary changes to their business models at a very low cost in order to become more resilient to future economic slowdowns. In that sense, I do not think credit risk is mispriced at the moment," Bertoni said.

On Monday, Galaxy Pipeline Assets, owned by a consortium of investors that took a stake in Abu Dhabi National Oil Company's (ADNOC) gas pipeline assets, hired banks to arrange investor calls for its second bond offering, after raising $4 billion in October.

Meanwhile Qatar's Ahli Bank is planning a potential $300 million issuance of Additional Tier 1 (AT1) bonds, the riskiest type of debt banks can issue that is designed to be perpetual in nature.

This would follow an AT1 Islamic bond issuance by Saudi Arabia's National Commercial Bank last month, which offered record-breaking rates.