Emirates NBD sold a rare transaction in the Asian currency market as Gulf issuers look to the region for attractive funding opportunities and to boost liquidity.
The UAE-based bank printed a Rmb1bn (US$139.2m) three-year Dim Sum on Tuesday in its first Dim Sum bond since October 2012, according to IFR data.
In March of that year, the bank had opened up the offshore renminbi market with the first ever Dim Sum bond from the Middle East.
A source close to this latest deal, which was issued at a yield of 2.4% from initial price guidance of 2.8% area, said the pricing arbitrage was attractive but marginal at around 5bp–7bp. The main objective was “to grow the pool of liquidity” as well as boost investor diversification.
He said that more issuers from the GCC were unlikely to immediately follow with Dim Sum bonds but added that more could come “in the next few months”.
A second source close to the deal called it “a great experiment for Middle East issuers” and said the public format was “symbolic” to get attention from the market. “It paves the road for future Middle East issuers, or even those from Middle Asia and western Europe,” he said.
“Generally, a lot of issuers from the Middle East are looking eastward as there is a lot of appetite from Asia,” said a senior banker away from the deal, referencing Qatar National Bank’s US$1bn five-year trade in July which had a distribution of 53% to Asian accounts.
“When issuers see that something works and there is attractive pricing arbitrage versus the [US] dollar curve they tend to follow,” said the banker. “So we’ll probably see a bit more issuance.”
Orders reached Rmb3.1bn, including Rmb1.5bn from the leads, at final guidance, with participation mainly coming from Asian investors. The senior Reg S notes will be rated A1/A+ (Moodys/Fitch), in line with the issuer.
“This year we have already seen a lot of issuers tap the Dim Sum bond market,” said a third source close to the deal. “It’s a trend we have been observing this year.”
The bond offered value compared with the likes of DBS, ICBC and CCB, which have 2028 notes trading in the high ones. Alibaba was another reference point, with its 2.65% 2028s bid at a yield of 2.28%.
Bank of China, Emirates NBD Capital, ICBC and Standard Chartered were the lead managers and bookrunners.
(Additional reporting by Morgan Davis)
Source: IFR
