Dubai Islamic Launches $1bn Tier 1 Sukuk

Dubai Islamic Bank, the largest sharia-compliant lender in the UAE by assets, launched a $1 billion hybrid sukuk on Wednesday, arranging banks said.

The perpetual sukuk, which is aimed at shoring up its core or Tier 1 capital, launched at a profit rate of 6.25 per cent, in line with final guidance released earlier in the day.

The final guidance was substantially tighter than initial price talk of seven per cent, after arranging banks said order books totalled $14 billion, indicating massive demand for the deal.

HSBC Holdings, Standard Chartered, National Bank of Abu Dhabi, Emirates NBD and DIB itself are mandated lead arrangers for the deal.

DIB is the second Gulf bank to issue a hybrid perpetual sukuk, after Abu Dhabi Islamic Bank sold $1 billion in a similar structure in November, attracting $15 billion in orders.

DIB had a Tier 1 capital ratio of 13.9 per cent at the end of 2012, compared to 12.6 per cent in 2007, according to an investor presentation.

The sukuk will be classified as deeply subordinated and is callable at year six. It will carry a fixed profit rate of six-year midswaps over the initial margin until first call, and then the profit rate will be reset to adjust for the then-prevailing six-year midswaps over the initial margin.