ABU DHABI: The Abu Dhabi government has decided to inject additional liquidity into five of its banks through capital notes which will bolster confidence in the financial system as the global crisis bites.
“Given current global economic conditions, the government believes that this strategic initiative is an appropriate and proactive response to ensure that the strong confidence in Abu Dhabi’s financial institutions is further enhanced,” it said in a statement.
Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank (ADIB), First Gulf Bank (FGB), National Bank of Abu Dhabi (NBAD) and Union National Bank, had said earlier that they planned to issue government Tier 1 capital notes worth a total of AED16 billion ($4.36 billion).
Hamad Al-Hurr Al-Suwaidi, member of Executive Council and undersecretary of the Abu Dhabi Department of Finance, added: “The government views this capital injection into the banking system as an important step to allow Abu Dhabi’s financial institutions to remain strong and well-capitalized compared to international peers, and fulfill their role in achieving the government’s vision for the Abu Dhabi economy.
Under this initiative, the government of Abu Dhabi will subscribe for Tier I capital notes issued by each of the above financial institutions, with a total aggregate principal amount of AED16 billion. The notes will be non-voting, non-cumulative perpetual securities, and will be callable subject to certain conditions.
J.P. Morgan acted as structurer and arranger of the notes, with Clifford Chance providing legal advice to the Abu Dhabi government and J.P. Morgan.
In response to the government’s initiative, FGB announced that it will issue Tier 1 capital notes to Abu Dhabi government, with a principal amount of AED4 billion. The issuance of the notes has been approved by First Gulf Bank’s board of directors yesterday and will be subject to obtaining shareholders’ approval.
The notes will bear interest at a fixed rate of 6 percent per annum payable semi-annually in arrears from (and including) the issue date for a period of five years, and thereafter at a floating rate, reset and payable semi-annually in arrear, reflecting the initial margin above the then prevailing six-month Emirates Interbank Offered Rate (EIBOR).
Abdulhamid Saeed, managing director of FGB, stated, “FGB has had a great 2008 with a bottom line of AED 3,005 million based on a strong balance sheet and a capital adequacy ratio of 14.1 percent. We are well on target to implement our growth plans for 2009 and beyond. In view of the ongoing global crisis, we believe that markets in general will better value banks with strong capital positions.”
ADIB also announced that it would issue Tier 1 capital Sukuk to the government of Abu Dhabi, with a principal amount of AED2 billion (Sukuk).
Tirad Mahmoud, chief executive officer of ADIB, commented: “We are firmly behind the government’s prudent plan to continue shoring up the local economy and, given that one of the principles of Shariah law is acting in the public benefit, these Sukuk will provide an ideal base on which to contribute to this plan NBAD also announced that it would issue Tier 1 capital notes to the government of Abu Dhabi, with a principal amount of AED4 billion.
— With input from agencies
