Burgan Bank issues $500,000,000 Perpetual Tier 1 Capital Securities

Successful issuance follows roadshows in London, HK, Singapore, Abu Dhabi and Dubai

Majed Essa Al-Ajeel

KUWAIT: Burgan Bank K.P.S.C., the second largest conventional bank by assets size in Kuwait, announced it has successfully placed Perpetual Tier 1 Capital Securities in the international debt capital markets. The securities comply with the Basel III regulatory framework that’s adopted by the Central Bank of Kuwait.

The transaction came on the back of a comprehensive global roadshow, covering the key financial centers in London, Hong Kong, Singapore, Abu Dhabi and Dubai. Following strongly positive feedback from the roadshow, the orderbook saw strong momentum from investors globally, which allowed the Bank to ultimately place $500,000,000 Perpetual Tier 1 Capital Securities at a yield of 5.750 percent (which translates to a margin of 400.7bps over the 5-year US Treasury Rate).

The transaction saw strong demand from a diverse investor base, which allowed for a balanced distribution. More specifically, the securities were allocated to investors across the Middle East (51 percent), Asia (22 percent), Europe (26 percent), and US offshore accounts (1 percent). In addition, allocations to different types of accounts were also well balanced, with banks (30 percent), private banks 26 percent, fund managers (37 percent), pension funds and insurance companies (3 percent) and other investors (4 percent) anchoring the orderbook.
Majed Essa Al-Ajeel, the Chairman of Burgan Bank commented: “The success of this issuance is a testament to the strength of Kuwait’s financial market and Burgan’s credit story. We would like to extend our sincerest gratitude to the Central Bank of Kuwait and Kuwait’s Capital Markets Authority for their diligence and professionalism throughout the transaction process”.

Burgan’s Group Chief Executive Officer, Masaud Hayat stated: “The diverse and high quality orderbook, which was 4.4x oversubscribed reflects the confidence that regional and international investors have in the Bank’s strategy, prudent financial management and prospects for growth and development”.

The issuance was part of a wider financing exercise. More specifically, it was undertaken in conjunction with a tender buy-back offer on the Bank’s existing $500,000,000 Perpetual Tier 1 Capital Securities, after which Burgan accepted $230,185,000 worth of securities for purchase at 100.85 percent of their nominal value. The value of the Perpetual Tier 1 Capital Securities repurchased represented 46.04% of their overall outstanding amount. This liability management exercise which was undertaken in relation to the Bank’s existing Perpetual Tier 1 Capital Securities is the first of its kind from the region.

Raed Al-Haqhaq, the Bank’s Chief Executive Officer – Kuwait commented: “The transaction demonstrates Burgan’s on-going strategy to support the Bank’s balance sheet with long-term funding, and meet regulatory liquidity and capital requirements. The support provided by the Bank’s advisors was indispensable to the transaction’s success”.
HSBC Bank plc and J P Morgan Securities plc acted as Joint Global Coordinators and Joint Lead Managers along with Arab Banking Corporation, Citigroup Global Markets Limited, Emirates NBD Capital Limited, First Abu Dhabi Bank P.J.S.C, Standard Chartered Bank and Watani Investment Company K.S.C.C. who also acted as Joint Lead Managers.

HSBC Bank plc and J P Morgan Securities plc acted as Dealer Managers on the tender offer. Burgan has affirmed credit ratings of A+ by Fitch, A3 by Moody’s and BBB+ by S&P underlying the credit strength of the Bank.

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