The AT1 party keeps growing — and now it’s the smaller names crashing it

Two more UAE banks are elbowing into the AT1 market: Ajman Bank priced (pdf) a USD 300 mn perpetual non-call 5.5-year AT1 sukuk at 6.50% overnight, while Commercial Bank of Dubai (CBD) mandated banks this week to gauge investor appetite for a benchmark-sized AT1 of its own.

Ajman Bank passed the demand test: Initial price thoughts for Ajman Bank’s offering came in around 7%, though books exceeding USD 500 mn (excluding joint lead manager interest) allowed the bank to tighten pricing to 6.50% on the mudaraba-structured issuance. That signals solid appetite for the BBB+ lender’s first-ever capital securities issuance.

ADVISORS- The issuance was arranged by our friends at Mashreq alongside ASB Capital, Dubai Islamic Bank, Emirates NBD Capital, FAB, JPMorgan, Morgan Stanley, Standard Chartered, and Warba Bank.

CBD, by contrast, is a repeat customer. The Baa1/A- rated lender redeemed a USD 600 mn AT1 in April and is now backtesting the market for a benchmark-sized, Reg-S perpetual non-call six-year replacement, with Abu Dhabi Commercial Bank, Barclays, Citi, CBD itself, Emirates NBD Capital, FAB, and Standard Chartered running the process. Investor calls started on Tuesday.

Why it matters: June’s AT1 wave — Dubai Islamic Bank’s USD 1 bn print at 6.25% (more than 2x covered), Mashreq's USD 500 mn at 6.625%, FAB’s second Tier 2 trade of the month — was a blue-chip story: the biggest, best-rated names taking advantage of a spread rebound to pad capital buffers. Ajman’s entry is a different signal. It’s a smaller, lower-rated lender that’s issuing its first-ever AT1 and only its second debt in more than a year — but the appetite was still there.

SOUND SMART- AT1 (Additional Tier 1) sukuk and bonds sit just above equity in a bank’s capital stack: perpetual, callable but never obligated to be redeemed and structured so they can absorb losses before senior creditors take a hit. Under Basel III and CBUAE rules, they count toward a bank’s regulatory capital buffers — which is why the current rush is as much about balance-sheet housekeeping as it is about opportunistic pricing.