The Commercial Bank of Kuwait (Al-Tijari) and the Kuwait Financial Centre have completed the KD100 million ($327 million) subordinated Tier 2 capital bonds programme. This was done after issuing the KD50 million second tranche bond with a tenure period of 10 years, callable after 5 years.

This issuance was executed through a private placement to qualified investors, where the bonds were fully subscribed, reflecting the investors’ trust in the quality of the issuance, enhancing the position of Al-Tijari, and highlighting the competence of the lead manager. This deal also marks the completion of the first bond programme for Al-Tijari.

The bonds of the second tranche of the programme offer rewarding returns for holders, as they were issued at a floating interest rate of 3.0% above the discount rate set by the Central Bank of Kuwait, with the minimum annual interest rate standing at 5.0%, per annum, payable semi-annually. The bank will use the proceeds from the bond issuance to increase their Tier 2 capital, enhancing the Bank’s capital adequacy ratio, in compliance with the Basel III framework. The proceeds will also support the Bank’s future expansion plans.

Solid capital base

Moreover, the unsecured subordinated Tier 2 compliant bond issuance was rated BBB by Capital Intelligence, reflecting the bank’s solid capital base, which enjoys a high first-tier capital ratio and a high total capital adequacy ratio.

Other supporting factors include high quality assets and maintaining its non-performing loan ratio at zero for six consecutive years as of the end of 2023 and the first quarter of 2024, in addition to high rates of non-performing loan reserves.

The bank also boasts a strong profit rate with the highest average of return on assets compared to similar banks, in addition to a high liquidity rate and a strong financing base.

Great traction

Al-Tijari CEO Elham Mahfouz said: “The bonds have received great traction from investors, given the excellent position the Bank enjoys in the Kuwaiti banking sector. Moreover, the strong demand that we have seen clearly demonstrates the market’s confidence in Kuwait’s banking sector in general, and in the bank’s performance and its future strategic plans in specific, coupled with the efficiency of the lead manager and subscription agent.

“The success of the bond issuance will directly contribute to the enhancement of the bank’s capital adequacy, while supporting future growth plans. The timely success of this deal is attributed to the clear operational framework of the bank, supported by the professional expertise of the lead manager and subscription agent, and the positive and impactful interaction with the regulatory authorities, namely the Central Bank of Kuwait and the Capital Markets Authority.”

General Manager-Treasury and Investment Division at Al-Tijari, Hussain Al Aryan, said: “As the second oldest established Kuwaiti bank, the success of this issuance further reinforces the bank’s positioning, from a credit and credibility perspective. It is also a testament to the strong positioning of Kuwait’s capital market, as an attractive investment destination that offers high return opportunities for both issuers and investors alike. This collaborative partnership with the Kuwait Financial Centre resulted in the efficient completion of the bond issuance, playing a pivotal role in the overall success of the operation.”

Strong demand

Kuwait Financial Centre (Markaz) CEO, Ali H Khalil, said: “We cherish the strong relationship we have with Al-Tijari and we are pleased to have fulfilled our role as a lead manager and subscription agent, solidifying our expertise in the investment banking sector. The issuance witnessed strong demand from investors, driven by the stable performance and growth strategy pursued by Al-Tijari, and its strong credit rating, in addition to our professional capabilities as the lead manager. We look forward to continuing supporting more local companies across various sectors with the issuance of bonds and sukuk, to achieve their business objectives.”

Rasha Othman, Executive Vice President, Investment Banking (Capital Markets) at Markaz, said: “The successful completion of the bond programme issuance denominated in Kuwaiti dinar represents a significant addition to our track record, as Markaz played the key role in orchestrating the first convertible bonds into shares, denominated in the Kuwaiti dinar, as well as the first BOT- Backed bonds in Kuwait, and the first high-yield bonds, denominated in Kuwaiti dinar, in addition to the first Sukuk issuance for a Kuwaiti company. These milestones reflect the continuous innovation and the outstanding execution capabilities of Markaz’s investment banking team.”--TradeArabia News Service

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