Tuesday, Jul 26, 2011

(Adds banker, analyst comments in paragraph 3, 5; background throughout.)

DUBAI (Zawya Dow Jones)--Abu Dhabi-based First Gulf Bank will issue a five-year, $650 million sukuk, or Islamic bond, carrying a profit rate of 200 basis points over mid-swaps, a banker familiar with the deal said Tuesday, against the backdrop of difficult market conditions amid the ongoing debt crisis in Europe and the U.S.

"The books are now closed and pricing is expected later today. The profit rate is tighter than the initial guidance of MS +210 bps," the banker, who declined to be identified, told Zawya Dow Jones.

The proceeds of the bond sale will be used for general corporate purposes, and to fund growth of the bank's Islamic businesses, according to another banker close to the deal. FGB "saw a good window open for sukuk," the banker said, adding that the "markets are very thirsty for Islamic bonds."

Citi, HSBC and Standard Chartered Bank are the joint book runners for the issue.

"It is certainly good to get the deal away in a difficult market, and at a lower price than initially indicated," said Raj Madha, a Dubai-based analyst at investment bank Rasmala.

FGB last week said it would hold meetings with fixed-income investors in Asia, Europe and the United Arab Emirates from July 21, after which it may issue an Islamic bond under its $3.5 billion sukuk program set up earlier this month.

While the government of Dubai and its flag carrier Emirates Airline raised debt in June, several other U.A.E. companies since delayed their debt plans as global market conditions deteriorated in the past few weeks due to the debt crisis in Europe and the U.S.

Dubai-based Majid Al Futtaim Holding said earlier this week it remained keen on issuing bonds once market conditions improve, after raising $1 billion via a club financing deal. Other regional companies such as Abu Dhabi's Dolphin Energy and the Tourism Development Investment Co. have also delayed bond sales.

-By Nikhil Lohade, Dow Jones Newswires, +9714 446 1694, nikhil.lohade@dowjones.com

(Nour Malas in Dubai contributed to this report.)

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

26-07-11 1133GMT