Bahrain Middle East Bank (BMB) has raised $200 million to set up a company to invest in US and emerging market debt by selling securities to Middle Eastern, US and European investors.
The company, Global Diversified CBO (collateralised bond obligation – GDL), was incorporated in the Cayman Islands after a three-month subscription that was more than three times oversubscribed, a BMB statement says.
The securities issued by GDL mature in May 2008. A senior class of paper accounts for $150 million and pays 70 basis points over the London interbank offered rate (Libor). It was rated Aa2 by Moody’s Investors Services and bought mainly by financial institutions in the US and Europe. A second class, amounting to $20 million, pays 255 basis points over 10-year US Treasury bonds and was rated Baa3 by Moody’s. Most of these securities were acquired by US insurance companies.
The proceeds from the issue will go into US and emerging market bonds with a tenor of up to 12 years. The residual cash flow after payments to holders of GDL securities will go to the equity shareholders. BMB itself owns $12 million of GDL’s $26.25 million equity and the rest is held by international investors.
‘The establishment of GDL fits in with BMB’s strategy of focussing primarily on investment banking and private banking,’ the bank’s chairman Abdul-Rahman Salem al-Ateeqi said in the statement, adding that it was one of the largest securitisation programmes launched by a Gulf bank. BMB an offshore bank, is owned by Gulf investors – its main shareholder is Kuwait’s Burgan Bank with 28.6 per cent of the bank’s equity. Since 1993 its strategy has been to turn itself into a niche investment bank.