Mashreq Bank issues additional Tier 1 bonds worth $500 million, with the lowest return in 5 years. issued Mashreq Bank Additional Tier 1 bonds worth $500 million, with an annual rate of return of 7.125%, with a reset margin of 270.5 basis points, according to a statement from the bank.
The issuance carries the lowest yield on first-level bonds determined by an Emirati bank over the past three years.
Mashreq Bank receives subscription requests amounting to $2.3 billion
And received Mashreq Bank, $2.3 billion in orders, resulting in the sale being oversubscribed by 4.4 times.
The bank said that this issuance achieved the lowest returns of any bonds issued by it Emirati financial institution, for additional Tier 1 bonds, over the past five years.
Who are the subscribers?
Investors from the Middle East received 77.5% of the issue allocation, while Europe (including the UK) received 19.5% of the issue.
The rest of the issuance allocations were distributed among the Asian markets and the American market.
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This issue carries the lowest margin ever for Mashreq (+270.5 basis points) for any of its capital issuances (Tier 1 and Tier 2), and is the lowest margin ever achieved on a standard Tier 1 dollar-denominated issuance from the Middle East. This is the first transaction for a Mashreq bank. Since raising $300 million in a 2022 bond issue.
Use of proceeds
He will direct Mashreq Bank, the proceeds of the issuance “to continue its growth plans until 2024 and beyond,” said the group’s CEO, Ahmed Abdel-Al.
What are Additional Tier 1 Bonds?
It is a common method through which banks increase their core capital without reducing shareholders’ stake.
Additional Tier 1 bonds are perpetual, meaning they do not have a specific maturity date.
These bonds generate returns in the same way as regular bonds, but they can usually be converted into shares in some cases, and therefore they are usually called in the financial sector conditional convertible bonds.
Mashreq Bank appointed several banks to advise on the issuance last week.
The bonds will be perpetual and non-callable for a period of five and a half years, which means that Mashreq Bank cannot redeem them during that period except after paying a fine.
