MIDEAST DEBT-UAE's NBAD eyes regional mandates

Wed Mar 7, 2012 4:30am GMT

* Pitching to Qatari banks and in Oman

* Jordan, Malaysia, Turkey also possible

* Sees $25-30 billion of GCC bond issuance this year

* Aims for six or seven deals this year

* Abu Dhabi sovereign could do "strategic" issue

By Rachna Uppal and Stanley Carvalho

ABU DHABI, March 7 (Reuters) - National Bank of Abu Dhabi, the largest lender by market value in the United Arab Emirates, is set to take on regional mandates to add to its home-market advantage, the head of the bank's debt capital markets team said.

The bank is pitching more aggressively for mandates in other Gulf Arab states, Fawaz Abu Sneineh told Reuters in an interview this week.

"We are trying to diversify outside the UAE, especially in the FI (financial institutions) space. We are pitching to Qatari banks, and in Oman," Abu Sneineh said, adding that Jordan, Malaysia and Turkey were also potential markets, but on a more opportunistic basis.

"Turkey is very competitive but it is one of our strategic markets."

Until now, large national banks in the Gulf, such as NBAD and Qatar National Bank, have focused on and tended to win deals in their respective states. Abu Sneineh said that in the future, more "regional champions" who understood the Gulf credit space could help support deals to tap regional liquidity.

"You need one regional champion to be on the transactions to see the credit story," he said. "We have the relationship traction, and a full DCM (debt capital markets) platform, from origination through to secondary trading to credit research."

Gulf bond issuance so far this year has totalled about $4 billion, not including a $4 billion riyal-denominated sukuk, or Islamic bond, from Saudi Arabia's General Authority for Civil Aviation issued in January.

Banks have been the largest dollar-denominated bond issuers so far, but Abu Sneineh said more corporate and quasi-sovereign issuance was likely in 2012, although he remains cautious on total volumes for the year.

"The factors driving more bond issuance in the region are refinancing, expansion plans, and conducive market conditions -- markets are attractive because rates are very low," Abu Sneineh said, adding demand for regional paper remained strong.

Last year, Gulf Cooperation Council entities tapped bond markets for just under $26 billion, slightly shy of the previous year's $30 billion, as the euro zone debt crisis and the Arab Spring pushed spreads for regional debt wider.

"This year...we may see between $25 billion to $30 billion of issuance," he said.

NBAD acted as lead arranger on five bond deals last year, and hopes to increase that in 2012, Abu Sneineh said, including potentially a sale from the lender itself, which is a frequent issuer of bonds. "We are hopeful of getting six or seven transactions this year."

"STRATEGIC" ABU DHABI

Abu Dhabi, the largest and wealthiest emirate in the UAE, last issued a sovereign bond in 2009; it has since been happy to allow its government-related companies to tap debt markets. Quasi-sovereign investment firms such as International Petroleum Investment Co (IPIC), Mubadala Development Co and Abu Dhabi National Energy Co are all regular debt issuers, benefitting to a large extent from implied government backing.

But although the government does not need to raise funding through this route, a sovereign issue could help set a new yield benchmark for state-linked entities.

"If Abu Dhabi do a bond issue, it will be strategic, to update the curve," Abu Sneineh said.

Abu Dhabi has a $1 billion maturity due in August, which the AA-rated government is unlikely to have any trouble meeting. The 5.5 percent bond was bid at just over 101 on Tuesday to yield 1.7 percent. The yield is about 40 bps tighter from Feb. 16 levels, according to Thomson Reuters data. (Editing by Andrew Torchia)