Manama: Bahrain-based BBK has launched a BD100 million ($265.3m) convertible bonds issue to boost its capital ratios.
The bonds issue begins today and will be open to subscription by shareholders until April 18.
Securities & Investment Company (SICO) is the lead manager of this first-of-its-kind Bahraini dinar-denominated perpetual convertible capital securities issue.
“The capital increase will be used for enhancing BBK’s capacity to grow its asset base primarily through core lending activities. It will also fund the bank’s strategic expansion initiatives, both locally and globally. These include the recent approval to open a representative office in Turkey, and our plans to boost international trade finance activities,” BBK chief executive Reyadh Yousif Sater said.
The offering is open to shareholders registered on March 27. The bonds are prices at BD1.
Shareholders also have the right to over-subscribe and transfer their rights to other shareholders or investors of their choice. Copies of the offering prospectus and the subscription application form can be collected from designated branches of BBK, which will also receive completed application forms and subscription funds.
The capital securities offer an annual interest rate of 8.25 per cent for the first five years, after which the rate will be reset to the equivalent of three-month Bahraini Dinar Interbank Offered Rate (BHIBOR) plus 5.86 per cent. Interest will be payable on May 2 and October 2 each year.
The capital securities, being perpetual, have no fixed or final redemption date, and may only be redeemed at the issuer’s option after five years, unless they have been converted by the issuer.
An option to convert the securities, in whole or in part, into ordinary shares of BBK has been reserved. This option could be exercised in any one of three years – 2019, 2020 or 2021 – subject to approval of BBK shareholders at an extraordinary general meeting.
Following approval by Bahrain Bourse (BHB), the securities can be traded from May 3.
“The securities will not only enable the bank to meet central bank and Basel III requirements for Tier 1 capital in a cost-effective and flexible manner; but also help improve liquidity and diversity of options on BHB. Our involvement reinforces SICO’s track record as a leading provider of comprehensive and innovative corporate finance services in the GCC,” SICO chief executive Najla Al Shirawi said.
The capital securities constitute a form of capital with specific features that comply with regulations applied to banks to meet their regulatory capital requirements; and which have been continuously strengthened by the Central Bank of Bahrain in line with the Basel Committee on Banking Supervision since the global financial crisis of 2008.