Bahrain’s GIB Picks Banks For Dollar Bond

Gulf International Bank, majority owned by the Saudi Arabian government, has mandated banks to arrange a dollar-denominated bond, planned before the end of the month, four sources familiar with the matter said on Sunday.

Bahrain-based GIB picked itself, as well as JP Morgan Chase Inc, National Bank of Abu Dhabi, Barclays Plc, Standard Chartered Plc and Societe Generale to arrange the deal, the sources said, requesting anonymity.

“GIB’s bond issue is more of a credibility rebuilding exercise. This was one bank which was a blue-chip name once,” said a banking source away from the deal.

“It’s not like they have any immediate funding needs but they do want to go out there and re-establish the trust with overseas investors. Obviously, their Saudi book has grown in recent years and the proceeds can be used to further bolster that,” the banker added.

GIB posted combined losses of $1.15 billion in 2007 and 2008 in the wake of the global financial crisis and was forced to sell nearly $5 billion of toxic assets to its shareholders in a bailout in 2009.

The bank, in September of this year, updated a prospectus for its $4 billion bond programme in which it said proceeds from any potential debt issue would be used for general corporate purposes.

Plans to issue in Malaysian ringgit have not materialised so far this year although the bank conducted investor meetings for a possible Islamic bond, or sukuk, under a 3.5 billion ringgit programme.

IFR Markets, a Thomson Reuters service, said in July that GIB may have opted to hold off on issuing a ringgit sukuk because of a widening in swap rates making it more expensive to swap ringgits into hard currency.

Despite its name and its base in Bahrain, GIB is 97.2 per cent owned by the Saudi government, a level of risk international investors are likely to be more comfortable with. Other shareholders are Gulf sovereign wealth funds, including Kuwait Investment Authority and Qatar Holding.

GIB said in the prospectus that it expects about $69 million of non-performing exposure to become performing by the end of 2012 after restructuring negotiations currently underway are finalised.