Our friends at Mashreq priced USD 500 mn 5.5-year AT1 notes at a 6.25% annual coupon, tightened from initial price thoughts of 6.75-6.875% as regional and international investors piled in, according to a press release. The lender secured strong demand by launching ahead of the Lunar New Year break, the start of Ramadan, and an expected wave of competing supply from other UAE banks.

Books were 4.2x oversubscribed at USD 2.1 bn, allowing Mashreq to print at its tightest-ever reset margin (+251.6 bps) on an AT1 or Tier 2 capital issue. The notes were priced the same as its previous AT1 issuance’s secondary market levels despite extending maturity by nearly two years, signaling solid investor appetite.

ICYMI- Mashreq first flagged the perpetual non-call, no-grow offering late last week to shore up its regulatory capital base. The move comes less than two years after its last benchmark AT1 issuance, which closed 4.4x oversubscribed.

Uh, Enterprise, what are AT1 bonds? They’re a common way for banks to raise core tier-one capital without diluting shareholders by issuing new equity. Additional tier one (AT1) certificates are a type of subordinated debt, meaning they rank below other types of bank debt in the event of liquidation. This makes them riskier than senior debt, but still gives them priority over equity holders. AT1 certificates are “perpetual,” having no fixed maturity date. They pay interest similarly to bonds, but can often be converted into equity under certain conditions, which is why they are often referred to as CoCos — short for contingent convertibles — in the industry.

ADVISORS- Abu Dhabi Commercial Bank, ANZ, Bank of America Securities, Barclays, Citi, Emirates NBD Capital, First Abu Dhabi Bank, Mashreq, Mizuho, and MUFG are advising on the offering.

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