Mashreq, a leading financial institution, recently announced the successful pricing of a $500 million additional tier 1 bond offering with a coupon of 7.125 per cent per annum. This marked their return to the debt capital markets since 2022 and achieved the largest price tightening by any UAE bank for an additional tier 1 issuance in the last five years. Following a well-attended global investor call and a physical roadshow in London, Mashreq opened the order books with initial price thoughts of the high seven per cent area and a transaction size of $500 million. The demand was overwhelming, leading to a book update of nearly $1 billion and ultimately exceeding $2.1 billion.
Despite strong demand, the orderbook held firm with minimal drops, allowing Mashreq to launch the transaction at a yield of 7.125 per cent. The Perpetual Non-Callable 5.5-year additional tier 1 bond offering was priced at a reset margin of +270.5bps, marking the tightest margin for Mashreq and the lowest coupon for any UAE bank in the past three years. Group Chief Executive Officer, Ahmed Abdelaal, expressed satisfaction with the transaction’s success, highlighting the investor engagement and support in a volatile market. Chairman Abdul Aziz Al Ghurair also congratulated the team on Mashreq’s successful capital notes issuance.
The transaction saw strong distribution across international and regional investors, indicating the investor community’s trust in Mashreq’s credit. The Middle East received 77.5 per cent of the allocation, with Europe (including the UK) at 19.5 per cent, and the rest divided between Asian markets and offshore US interest. Real money demand from private banks and asset managers secured 90 per cent of the allocations, with bank treasury divisions and hedge funds taking the remainder. The bookrunners for the issuance included prominent financial institutions like Abu Dhabi Commercial Bank, BofA Securities, Citi, and Emirates NBD Capital.
With ratings of A by Fitch, A3 by Moody’s and A by S&P, all with a stable outlook, Mashreq’s successful bond offering affirms its strong standing in the market. The oversubscription of the transaction amidst market volatility showcases investor confidence in Mashreq’s growth plans. The funds raised through this offering will support the bank’s expansion and growth strategies into 2024 and beyond. In conclusion, the successful pricing of the $500 million bond offering reflects Mashreq’s ability to navigate the challenging market conditions and secure strong investor support for its strategic initiatives.
