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Omani bank gets tight pricing for small perpetual bond sale

REUTERS/Sultan Alhasani
The bonds, which will settle on November 29, 2022 are non-callable for five years

The National Bank of Oman on Thursday raised $134.1 million from a sale of Additional Tier 1 bonds at 6.75 percent, tighter than perpetual bonds it sold in April last year, a bank document showed on Thursday.

The unrated bonds were pre-sold to Omani investors, a source familiar with the matter said, asking not to be identified.

“Looks like a reverse inquiry because they went directly to final guidance without prior announcement and pricing was also too tight,” said Zeina Rizk, executive fixed income director at Arqaam Capital, which did not invest.

Reuters could not immediately reach NBO for comment.

Additional Tier 1 (AT1) bonds, the riskiest debt instruments banks can issue, are designed to be perpetual in nature, but lenders can call after a specified period.

The bonds, which will settle on November 29, 2022, are non-callable for five years and have a first call date on November 29, 2027 with a first reset date six months later, the bank document showed.

On that date – May 29, 2028 – the bonds will reset at 286.1 basis points over five-year US Treasuries. The price will then reset every five years.

NBO and Standard Chartered were joint lead managers on the debt sale.

The bank would use the bonds “to manage its Tier 1 Capital base and overall capital adequacy” and for general corporate purposes, the document showed.

NBO sold $300 million in AT1 bonds in April last year at eight percent, according to Refinitiv, a much higher return for investors compared with the new bonds despite interest rates rising rapidly since then. They were yielding 8.142 percent on Thursday, according to Tradeweb.

It also raised $500 million in bonds at 5.625 percent in 2018 that mature in September next year, Refinitiv data showed. They were trading to yield 6.727 percent on Thursday, according to Tradeweb.

Bond sales from the Gulf have plummeted this year amid aggressive rate hikes as central banks try to tame historic inflation, though some issuers have pounced on windows of relative market calm to issue.