BANK Muscat Al-Ahli Al-Omani (BMAO), one of Oman's four main commercial banks, has been given central bank approval to issue the Middle East's first convertible bond, the bank's senior investment manager said on 19 September. The RO 10 million ($26 million) issue will also be the first Omani corporate bond.

'We are hopeful we can make the issue in October,' TVA Raja told MEEDMONEY. The bonds have to be approved by the Muscat Securities Market but have already got the personal endorsement of its chief executive Mahmoud al- Jarwani. The bond issue, which will be to existing shareholders, is in effect a delayed-action rights issue: half the bonds will be converted into shares after two years, and the other half after three. Oman's stock exchange has more than doubled its value since the start of this year, with a series of company flotations attracting huge local interest.

The bank says it has chosen this way of raising funds because it needs to increase its capital to the level of other major banks in Oman, but does not want to dilute the growth in its earnings per share. The 9 percent annual coupon on the bonds is also much cheaper than the 25 per cent a year that shareholders would expect in dividends, Raja says. In July, BMAO became the first Omani bank to tap the international loan markets with a $50 million syndicated loan arranged by Societe Generale and HSBC Financial Markets (MEED 1:8:97).