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Oman’s Bank Sohar Scraps Convertible Bond, Plans OMR40m Rights Issue

Oman’s Bank Sohar Scraps Convertible Bond, Plans OMR40m Rights Issue

The lender said that its board had decided against issuing the convertible “due to uncertainty regarding its eligibility as an additional Tier 1 instrument”.

Bank Sohar, the Omani lender currently merging with larger rival Bank Dhofar , has scrapped plans for a convertible bond issue and will instead undertake a OMR40 million ($103.9 million) rights issue, it said on Tuesday.

The bank, the Sultanate’s fifth-largest by assets, had said in May it would issue a mandatory convertible bond worth OMR70 million to help boost its Tier 1 – or core – capital.

However, in a bourse filing on Tuesday, it said its board had decided against issuing the convertible “due to uncertainty regarding its eligibility as an additional Tier 1 instrument”.

Instead, Bank Sohar will complete a rights issue, subject to regulatory approval, for a smaller amount as “this is the capital requirement to support the future growth of the bank”, with a further OMR30 million issue possible in the future if the lender required the extra capital.

Bank Sohar’s Tier 1 ratio was 10.39 per cent at the end of the second quarter, with its total capital adequacy ratio – combined Tier 1 and Tier 2 (or supplementary) capital – at 13.90 per cent, according to figures on its website.

By comparison, the median Tier 1 capital ratio in the Omani banking system was 11.97 per cent at the end of 2013, according to Thomson Reuters data.

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