Mashreq places $500 million five-year dollar bond

Mashreqbank has raised $500 million through a five-year US dollar-denominated senior unsecured bond, with the pricing spread tightened to 115 basis points over US Treasuries as investor demand supported the transaction.

The Dubai-based lender completed the Regulation S offering under its $5 billion Euro Medium Term Note programme after mandating a group of international and regional banks for investor calls earlier this week. The transaction marks Mashreq’s latest return to the senior debt market after two Additional Tier 1 capital issuances earlier this year.

The bank entered the market with a five-year benchmark-sized deal carrying investment-grade ratings aligned with Mashreq’s own credit profile. Fitch Ratings assigns the lender an A rating, Moody’s rates it A3 and S&P Global Ratings gives it an A rating, with stable outlooks from all three agencies.

Pricing was tightened during the book-building process to a spread of 115 basis points above the relevant US Treasury benchmark, indicating that demand allowed Mashreq to improve terms from the level discussed with investors earlier in the process. A tighter spread reduces the premium the issuer pays above the underlying government benchmark and is generally viewed as a measure of stronger execution when order books remain firm.

The senior unsecured structure places the securities above subordinated capital instruments in the bank’s repayment hierarchy. That distinguishes the latest transaction from Mashreq’s two $500 million Additional Tier 1 deals completed in February and July, which were perpetual securities designed to count towards regulatory capital.

Mashreq priced its February Additional Tier 1 bond with a 6.25 per cent coupon after an order book that peaked at about $2.1 billion. The transaction achieved a reset margin of roughly 252 basis points and represented the first capital issuance by a UAE bank this year. A second $500 million perpetual non-call 5.5-year Additional Tier 1 issue followed in July with a 6.625 per cent coupon and a spread margin of 242 basis points over US Treasuries.

The latest bond therefore represents a change in instrument as Mashreq taps the market for conventional senior funding rather than regulatory capital. Senior unsecured debt is ordinarily issued for general funding and balance-sheet purposes and carries lower credit risk than Additional Tier 1 securities because it ranks ahead of those instruments in a resolution or liquidation.

The deal also comes as borrowers from the Gulf return to international debt markets after a quieter period during the summer and amid continued volatility in global rates. Several banks and large corporates from the region have either completed dollar offerings or approached investors for new transactions since late August.

First Abu Dhabi Bank, another UAE lender, priced a $500 million five-year senior unsecured bond this week at 90 basis points over US Treasuries after initially marketing the deal at 115 basis points. Its order book exceeded $1 billion, highlighting demand for high-grade UAE financial-sector paper despite wider benchmark yields.

Mashreq’s issue was arranged by Abu Dhabi Commercial Bank, ANZ, Barclays, BBVA, BofA Securities, Emirates NBD Capital, First Abu Dhabi Bank, ICBC, Mashreq, MUFG, Societe Generale and Standard Chartered. The banks had been appointed to conduct fixed-income investor calls ahead of the transaction.

The offering is being drawn under Mashreq’s established Euro Medium Term Note programme, which provides the bank with a framework for issuing debt securities in international markets, subject to prevailing conditions and documentation requirements.

Regulation S transactions are offered outside the United States under an exemption from registration requirements, a structure commonly used by Gulf issuers seeking access to international institutional investors. The format enables banks to diversify wholesale funding sources across regions while matching maturities and currencies with treasury requirements, although overall borrowing costs remain sensitive to movements in US government yields.

Mashreq has also used the Islamic debt market for senior funding. The bank sold its inaugural $500 million five-year sukuk in April 2025, pricing it at a 5.03 per cent profit rate and 105 basis points over US Treasuries after receiving orders of about $2.9 billion.