Burgan Bank Of Kuwait To Sell Bonds This Year Amid Expansion

Burgan Bank SAK (BURG), the third-biggest Kuwaiti lender by assets, plans to raise 100 million dinars ($354 million) from a bond sale this year to boost capital as it expands, the chief executive officer said.

The seven- or 10-year notes will “most likely” be denominated in the local currency, Eduardo Eguren said in an interview yesterday at the bank’s headquarters in Kuwait City. The lender expects to receive central bank approval for the sale in the next few days and has appointed Kipco Asset Management Co. (KAMCO) as an adviser, he said. NBK Capital Ltd., the investment banking unit of National Bank of Kuwait (NBK) SAK, is also working on the issuance.

“When you grow your balance sheet, your need for capital goes up,” Eguren said. The bank wants to “develop the local market and help create a yield curve in Kuwait” of dinars, he said.

Burgan Bank will tap the debt market as borrowing costs for lenders in the six-nation Gulf Cooperation Council tumble to near record lows, giving them an opportunity to raise funds as credit growth accelerates. The yield on Burgan Bank’s 7.875 percent notes maturing in September 2020 dropped 96 basis points, or 0.96 percentage point, this year to an all-time low of 5.72 percent on Nov. 8, before trading at 5.79 percent yesterday, according to data compiled by Bloomberg.

The Kuwaiti bank, which posted a 15 percent increase in income from lending in the third quarter, acquired Istanbul- based Eurobank Tekfen AS in April. The acquisition will lower Burgan Bank’s capital adequacy ratio to 14.9 percent from 18 percent now once it is completed next month, Eguren said.

Burgan Bank, a unit of Kuwait Projects Co. (KPROJ), has finalized the due diligence to acquire 25 percent of Malta-based FIMBank Plc (FIM), Eguren said.

Bloomberg