The National Bank of Fujairah (NBF) raised USD 275 mn in a mandatory convertible bond (MCBs) issuance, according to a press release (pdf). The bank issued the additional tier 1 (AT1) bonds in a bid to enhance its capital structure, support its business and operational strategy, and refinance existing AT1 USD 350 mn bonds.

Details: Privately placed with the Fujairah government, the issuance will see the bonds automatically converted into ordinary shares at a rate of AED 2.85 per share within two years.

Uh, Enterprise, what are AT1 bonds? They’re a common way banks raise core tier-one capital without diluting shareholders by raising equity. Additional tier one certificates (or just “AT1 certificates”) are a form of subordinated debt — they rank behind other types of bank debt in case of liquidation. That makes them riskier than senior debt, but still prioritizes them above equity holders. AT1 certificates are “perpetual” in that they have no fixed maturity date. They pay interest in much the same way as a bond does, but usually can be converted into equity in some circumstances — that’s why they’re often called CoCos in the industry, for “contingent convertibles.”

What they said: “This AT1 capital issuance will further reinforce NBF’s position and will provide

the solid foundation to grow and meet with any unforeseen challenges that may arise from

the evolving global economy and operating environment,” NBF’s deputy chairperson Raja Easa Al Gurg said.

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