National Bank of Abu Dhabi (NBAD) has issued a AED 2,500 million ($681.2 million) subordinated convertible note, raising the bank’s regulatory capital by 35 per cent. The instrument is the first of its kind in the UAE.The 10-year notes pay 25 basis points over Ebor and will be listed on the Abu Dhabi Securities Market. They will count as tier two capital and are convertible to ordinary shares on the second, third, fourth and fifth anniversaries of the issue date. The paper was privately placed to local and international institutions. ‘Subordinated convertible notes are a very efficient way of raising capital,’ said Michael Tomalin, chief executive officer of NBAD, on 17 March. ‘The notes will increase our regulatory capital by some 35 per cent with no dilution at all in the first two years. Even if fully converted after two years, dilution is only about 6 per cent, with obvious benefits to existing shareholders.’ Subordinated debt instruments are becoming increasingly popular among GCC institutions and the trend is expected to accelerate during 2006 (see Special Report, page 61).