Mashreq shores up capital with tightly priced $500m bond deal

Mashreq has successfully priced a $500m Additional Tier 1 (AT1) bond offering at a coupon of 7.125 per cent on June 3.

This marks the first bank capital transaction from the UAE’s financial institutions (FIG) complex in 2024 and Mashreq’s return to the debt capital markets since their last issuance in 2022.

Mashreq secured the largest price tightening by any UAE bank for an AT1 issuance in the last five years.

Initial price thoughts (IPTs) started in the high 7 per cent area, but strong investor demand allowed Mashreq to set the final yield at 7.125 per cent.

Mashreq bond: Lowest coupon, robust investor demand

The offering achieved the lowest coupon by any UAE bank for an ATI transaction in the last three years.

Mashreq secured a reset margin of +270.5 basis points (bps), marking their tightest-ever spread on a subordinated AT1 or AT2 issuance and the lowest on any conventional US dollar AT1 benchmark out of the Middle East.

The transaction garnered significant investor interest, with the order book, exceeding $2.3bn at its peak, representing a 4.4 times oversubscription.

This strong demand came from both international and regional investors, with the Middle East receiving the majority of the allocation (77.5 per cent), followed by Europe (including the UK) at 19.5 per cent.

Real money investors, particularly private banks and high-quality asset managers took up 90 per cent of the issuance.

Mashreq Group CEO Ahmed Abdelal, commented, “We are delighted with the overwhelming investor response for this strategic transaction.

“The oversubscription, especially in a volatile market, is a strong testament to investor confidence in Mashreq. This issuance will fuel our growth plans well into 2024 and beyond.”

The offering comprised perpetual non-callable 5.5-year AT1 notes.

Abu Dhabi Commercial Bank, Al Ahli Bank of Kuwait (DIFC Branch), BofA Securities, Citi, Emirates NBD Capital, First Abu Dhabi Bank, Kamco Investment Company, Mashreq, and Mizuho acted as bookrunners for the issuance.