Emirates NBD has hired six banks to help arrange a benchmark-sized subordinated bond sale, four sources familiar with the plan said, as it seeks to reduce government support for its capital ratios.
ENBD has hired HSBC Holdings, National Bank of Abu Dhabi, Citigroup, JP Morgan Chase, Societe Generale and itself for the planned sale, two of the sources said, speaking on condition of anonymity as the matter is not public.
ENBD declined to comment.
A successful sale will help the lender, 55.6-percent owned by state fund Investment Corp of Dubai, repay part of the Dh12.6 billion it received from the government in 2008. The bank said in January that it was looking to begin repayment of the funds.
Benchmark size transactions are at least US$500 million.
Banks in the United Arab Emirates will aim to repay Tier 2 capital placed with them at the height of the global financial crisis this year, with some turning to the bond market to avoid servicing expensive debt.
The country's Ministry of Finance placed Dh70bn with banks to shore up their balance sheets after the collapse of Lehman Brothers in September 2008 triggered a seizure of the world's financial system.
The price difference between government bonds, which contribute to Tier 2 capital, and market prices for new debt is prompting many lenders to sell bonds to replace the more expensive obligations.
ENBD's planned sale follows a similar move by Abu Dhabi Commercial Bank which raised $1.5bn from a two-tranche bond last month, with a subordinated tranche raising $750m for the Abu Dhabi lender.
While the government bonds have a 5 per cent coupon this year, rising to 5.25 per cent for the final three years, ADCB's ten-year Tier 2 note carried a 4.5 per cent coupon.
ENBD sold a $50m subordinated bond in a privately placed debt sale, IFR Markets, a unit of Thomson Reuters, reported on Wednesday.
The ten-year, non-call five deal, which followed an investor request to sole bookrunner Commerzbank for Tier 2 paper from a Middle Eastern or Asian bank, was priced roughly 75 basis points above where a standard ENBD bond would come.
Other UAE banks have chosen to use internal cash resources – at a time of limited loan growth in the country – to pay off the government cash: ADCB, First Gulf Bank and Union National Bank repaid a combined Dh10bn last week.