Bahrain International Bank (BIB), the Manama-based offshore investment bank, has issued $110 million of 10-year floating-rate notes, BIB announced on 20 December. The structure and the long maturity of the bonds are a first for a Gulf-based institution, general manager and chief executive Robin McIlvenny says.

The issue, which was placed with institutional investors in Europe, the US and the Far East, was made through BIB London subsidiary Dilmun Capital and a special purpose co-issuer, Dilmun Capital Corporation. Morgan Stanley International was the financial adviser and underwrote the whole amount.

The floating-rate notes were rated Aa2 by Moody’s Investors Service, based on an assessment of BIB’s existing portfolio of assets.

BIB arranged an interest rate swap to create a fixed-rate coupon on a portion of the notes. The issue was priced in November at 99.25 and offers a coupon of six-month London interbank offered rate (Libor) plus 87.5 basis points. This offers an all-in price to the investor of 1 percentage point above six-month Libor.

‘We have taken a very attractive opportunity to raise long-term cost- effective funding for BIB,’ McIlvenny said. The issue has added 10-year debt to the bank’s balance sheet at an all-in cost below that of dividend payments on outstanding equity, he added.

The bank’s total assets are nearly $500 million, up from $374 million at the end of June 1993, and its shareholder capital is $200 million (MEED 23:7:93).

Track record

‘Our ability to raise these funds was the direct result of the successful track record we have built up in managing our marketable securities portfolio. We can now use this capital to continue building our securities, corporate finance and real estate business lines, which in turn will create more investment product opportunities for our clients in the Gulf,’ McIlvenny added.

BIB’s investment operations will concentrate on specialised areas such as mortgage-backed securities, McIlvenny said.

As part of its corporate activities, BIB has nearly concluded its first management buyout of a private Gulf company. The new funds will also help continue investment and underwriting placements of debt and equity in the Gulf, and planned direct investments in the US and the UK.

The bank recently closed its newly established American Real Estate Income & Growth Fund, raising an initial capital of about $15 million (MEED 15:10:93). Real estate operations will continue to be geared to the US, BIB says. The bank opened its shares to non-GCC nationals in May 1993.