CASE STUDY: Noor Bank Issues Debut Tier 1 Perpetual

CASE STUDY: Noor Bank Issues Debut Tier 1 Perpetual

Noor Bank’s debut perpetual Tier 1 perpetual sukuk issuance met with strong demand from global investors and achieved the lowest yield of any Tier 1 Basel III compliant perpetual sukuk in Dubai, despite a volatile market backdrop which saw oil prices dip below US$30 per barrel.

Deal At A Glance

Deal Type: Tier 1 Sukuk

Deal Structure: Reg S Perpetual Non-Call 5 (NC5) Sukuk

Obligor: Noor Bank

Issuer: Noor Bank

Governing Law: English Law, (except the Mudaraba Agreement governed by Dubai and Federal Laws of the   UAE)

Listing: Nasdaq Dubai

Global Coordinators and MLAs: Citi, Standard Chartered Bank

MLAs: Dubai Islamic Bank, Emirates NBD, First Gulf Bank, Noor Bank, Sharjah Islamic Bank

Lead Arrangers: Ajman Bank, Union National Bank

Legal Adviser to Obligor: Allen & Overy

Legal Adviser to Issuer: Maples

Legal Adviser to JLMs: Latham & Watkins

Size: US$500mn

Issue Date: June 2016

Maturity Date: Perpetual (first call date: June 2021)

Yield: 6.25%

Reoffer price: 100%

Spread: MS+490.5bp

Use of Proceeds: To boost the bank’s capital base

Background

Noor Bank’s main objective was to launch a competitively priced US dollar denominated benchmark size Tier 1 capital perpetual issuance to help boost the bank’s core capital and lending capabilities.

After embarking on an extensive global roadshow, Noor Bank successfully placed a US$500mn perpetual sukuk with a 5-year non-call (NC5) at 50bp below IPTs and raised critical long-term funding despite an unsupportive market backdrop.

Transaction Breakdown

The deal’s execution followed a global roadshow that included key financial hubs such as Abu Dhabi, Dubai, Hong Kong, London and Singapore.

The US$500mn perpetual sukuk included a 5-year non-call (NC5) feature and took a Mudarabah structure.

Consensus between the JLMs and Noor Bank was to open the book when Asian markets opened on June 1, allowing sufficient time to for orders to gain tractions. The books were left open overnight, allowing the investors to get the requisite approvals.

The initial pricing thoughts (IPTs) came in the mid-to-high 6% area and was further tightened to 6.5%. Having witnessed increasing demand from investors the coupon was finally priced at 6.25%.

The pricing achieved was roughly 25bp to 50bp tighter than IPTs. The transaction was well-received in the market, with the orderbook closing at US$1.2bn – more than twice oversubscribed.

Overall, Noor Bank managed to print the lowest priced contingent Basel III compliant Tier 1 paper in Dubai. It was the first issuance of its kind from the UAE in 2016, and one of just a handful of other Additional Tier 1 perpetual sukuk deals to hit the region’s market this year.

 

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