Mashreqbank has successfully priced a $500 million Additional Tier 1 bond, marking its return to the debt capital markets after a two-year hiatus. The bond, offering a 7.125% annual coupon, achieved significant investor interest, with the order book peaking at $2.3 billion, representing a 4.4 times oversubscription.
The issuance stands out as the first bank capital transaction from the UAE’s financial institutions group in 2024. Initial price thoughts were set in the high 7% range, but strong demand allowed for a final yield of 7.125%, reflecting a substantial tightening of over 50 basis points from the initial guidance. This represents the largest price tightening by any UAE bank for an AT1 issuance in the past five years.
The bond is structured as a perpetual non-callable 5.5-year instrument, with a reset margin of +270.5 basis points. This reset margin is the tightest ever achieved by Mashreq for any subordinated capital issuance and marks the lowest coupon for any UAE bank’s AT1 offering in the last three years.
Investor distribution was predominantly from the Middle East, accounting for 77.5% of the allocation, followed by Europe, including the UK, at 19.5%. The investor base comprised mainly private banks and high-quality asset managers, with real money investors taking up 90% of the issuance.
