FAB issues an oversubscribed USD 700 mn sukuk, but the pricing premium hasn’t gone anywhere

International investors are also still coming for UAE debt…: First Abu Dhabi Bank (FAB) successfully tapped the international markets on Wednesday, raising USD 700 mn in a five-year senior unsecured sukuk, Zawya reports. The transaction is the first international Islamic bond from the GCC since the escalation of regional conflict — and the 2x oversubscription rate tells us the market is still hungry for investment-grade regional paper.

The fine print: The notes were priced at a spread of 85 bps over US Treasuries, tightening from initial guidance of 115 bps, with a reoffer yield of 4.859%. While the pricing was described by some bankers as “flat or negative” to FAB's secondary curve — indicating strong technical demand — the print was still 25 bps wider than its USD 750 mn senior bond issuance in January.

That’s not surprising given the geopolitical backdrop, with analysts recently telling us that spreads have significantly tightened from earlier during the war, though they are yet to reach pre-war levels. This is a sharp reversal from early April, when analysts told us that market jitters made it nearly impossible to build order books without offering “meaningful concessions.”

Still, the positive signs are hard to ignore. FAB’s tight spread and oversubscription shows that GCC debt is still very much in demand, especially after an even riskier offering from Emirates NBD last week — an AT1 issuance — also saw pricing tighten to 6.25% from 6.75% earlier on strong demand.

ADVISORS- Joint lead managers and bookrunners include Abu Dhabi Islamic Bank, Bank ABC, Dubai Islamic Bank, First Abu Dhabi Bank, HSBC, Industrial and Commercial Bank of China, Kuwait International Bank, KFH Capital, and Standard Chartered, which is also acting as billing and delivery bank.