MANAMA – Gulf International Bank (GIB), rated A (Fitch) / A3 (Moody's) / BBB+ (S&P), announced Wednesday the successful completion of its senior unsecured $500 million 5-year debut issue under its $4 billion Euro Medium Term Note Program. The notes were issued at a spread of $5-year mid-swap plus 165 basis points with a coupon rate of 2.375 percent. The highly successful Reg S transaction achieved one of the lowest coupons for a $5-year senior unsecured transaction by a bank in the MENA region, clearly reflecting investors' high confidence in GIB's financial strength and credit story. Initial price guidance was communicated at 8:00 a.m. London time Tuesday (Dec. 4) to the market at a range of mid-swap +165-175 basis points, which resulted in strong momentum allowing GIB to execute intra-day and to price at the low end of the price guidance. The order book was 3.5 times oversubscribed and comprised around 90 investors. The success of GIB's transaction was underpinned by the international marketing strategy undertaken in the Middle East, Asia and Europe, with two teams headed by GIB's senior management covering all regions in a short timeframe. The government of Saudi Arabia's 97.2 percent shareholding in GIB appealed to a diverse and high-quality investor base. Dr. Yahya Alyahya, GIB's Chief Executive Officer, said: “We are very pleased with the successful closing of this bond issue at a highly attractive pricing despite the volatile market backdrop. The demand from a large number of highly respected institutions reflects the market's confidence in GIB's strong financial position.” He added “this bond issue confirms GIB's commitment to diversify its funding sources and utilize innovative funding structures to achieve the lowest possible cost of funding for the bank.” The joint book runners for the offering were Barclays, GIB Capital, J.P. Morgan, National Bank of Abu Dhabi, Société Générale CIB and Standard Chartered Bank. Moody's Investors Service has GIB long-term and short-term foreign currency deposit ratings of A3 and P-2 respectively. The bank's standalone financial strength rating has also been reaffirmed. Moody's emphasized in its ratings report that GIB's solid capital base, asset quality and the improvement of its funding profile have contributed to the reaffirmation of these credit ratings. Moody's said “recent improvements in Gulf International Bank's asset quality reduce downward pressure on the ratings. The bank's asset quality metrics have improved following a reduction in the ratio of non-performing loans (NPL) to gross loans to 6.5 percent as of September 2012 (YE 2010: 10.9 percent), driven by NPL settlements and restructurings.” The agency added that the outlook on the ratings can improve over the next few quarters as a result of continued asset quality improvements and the successful implementation of GIB's new strategy and business model. Moody's also indicated that GIB's “ownership by the Saudi government (Aa3 stable) is a key factor in the Bank's standalone credit strength as it supports business origination and enables the Bank to adopt cost effective borrowing strategies.” – SG
