The bank is to issue a convertible bond to its three main shareholders to help shore up its balance sheet, while it awaits approval from its retail shareholders on a capital increase.
The bank, which is making provisions of nearly $300m relating to sub-prime exposure, is eager to get the cash injection as quickly as possible to continue with its development plan for 2008.
Asaf Mohyuddin, planning & financial control director at ABC, says that the sub-prime provisions for 2007 had trimmed the bank’s budget for 2008, and it was left facing the choice between seeking an immediate capital increase, or putting its development plans on hold.
Because a rights issue has to be offered to all shareholders it could take up to three months to complete the transaction. As a result, the bank is to issue the convertible bond to its three main shareholders to gain an immediate cash injection. The shareholders are the Abu Dhabi Investment Authority, the Central Bank of Libya and the Kuwait Investment Authority.
Analysts have speculated that given the continued fall in asset prices in the US related to the subprime crisis, ABC could be forced to make further provisions in the first half of this year.