Gulf International Bank (GIB) is heading for the international capital markets for the first time, with a $200 million floating rate note (FRN) issue that will be launched this month. The Bahrain-based commercial bank has appointed Chase Manhattan International to lead manage the issue.
The announcement of the FRN issue confirms that corporate and government borrowers in the Gulf, encouraged by investment grade ratings from US credit rating agencies, are starting to turn to the capital markets for funding instead of traditional syndicated loans. GIB is part of Gulf Investment Corporation, which is owned by the six Gulf Arab states. The bank is rated BBB+ by Standard & Poor’s and Baa2 by Moody’s Investors Service. The only other Gulf bank that uses FRNs for funding at the moment is Bahrain International Bank, an investment bank.
The interest rate on the FRNs is likely to be about 35 basis points over the London interbank offered rate (Libor), slightly cheaper for GIB than its most recent, seven-year syndicated loan which was priced at 37.5 basis points over Libor for the first five years and 45 basis points thereafter. The FRNs may still be more expensive for GIB than a syndicated loan would be at the moment, given the liquid state of the loan market. But the bank’s assistant general manager, David Gates, says a FRN will give GIB access to new pools of investment capital worldwide, without it having to borrow from banks right up to their exposure limits. The small size and relatively short maturity of the issue reflects its novelty, he adds. ‘The reason for doing a five-year FRN is that this is our first time and we want to ensure a successful transaction.’