Kuwait's Boubyan Bank Targets $500mln AT1 Sukuk, Second Raise in Weeks

Summary

• Boubyan Bank is pursuing an Additional Tier 1 sukuk issuance of up to $500 million.
• The Kuwait-listed lender raised KWD 90 million through its first AT1 sukuk in September.
• A second capital raise within weeks points to an accelerated buffer-building push by the bank.

The latest

Boubyan Bank has secured regulatory approval to raise up to $500 million through an Additional Tier 1 capital issuance, in US dollars or the equivalent in other currencies, ZAWYA reported. It would be the Kuwait-listed lender's second debt raise in a matter of weeks, following an AT1 sukuk in September. The bank has not announced pricing or a launch date.

Details

• The size: The approval covers an AT1 capital raise of up to $500 million, according to ZAWYA, with the option of issuing in US dollars or the equivalent in other currencies. The ceiling is an authorisation rather than a confirmed deal size, and the bank has not said how much of it it intends to use.
• The precedent: The planned transaction follows Boubyan's first AT1 sukuk issuance in September, which raised KWD 90 million. That deal established the instrument in the bank's capital structure; the new approval is substantially larger in headline terms and is denominated in hard currency rather than the local dinar.
• The timing: ZAWYA described the move as the bank's second issuance in several weeks, an unusually compressed sequence for a single lender. Boubyan has not disclosed a launch window, an investor roadshow schedule, or whether the issuance will be executed in one tranche or more.
• The ratings: Boubyan Bank carries an A2 rating from Moody's and an A rating from both S&P and Fitch. Those are investment-grade assessments of the institution itself; AT1 instruments are typically rated several notches below an issuer's senior profile because of their loss-absorbing features.
• The instrument: Additional Tier 1 is perpetual capital that counts toward a bank's regulatory buffers. It carries no fixed maturity, coupon payments can be halted at the issuer's discretion, and the principal can be written down or converted if capital ratios fall below set triggers — which is why it prices above senior debt.
• The sukuk format: Structuring the raise as sukuk rather than a conventional bond aligns the instrument with Boubyan's Islamic banking mandate and opens it to Sharia-compliant investor mandates in the Gulf and Southeast Asia that cannot buy conventional AT1 paper.
• The listing: Boubyan is listed in Kuwait, meaning capital actions of this scale are disclosed to the local market. The bank has not detailed the use of proceeds, the pricing benchmark, or the first call date attached to the proposed instrument.
• What is unstated: No arranging banks, coupon guidance, or settlement timetable have been named for the proposed issuance, and the bank has not indicated whether the approved ceiling will be drawn in full or in stages.

Background

Gulf banks have leaned on AT1 sukuk to reinforce regulatory capital without diluting shareholders, since the instrument counts toward buffers while sitting outside ordinary equity. Boubyan entered that market in September with its first such issuance, denominated in Kuwaiti dinars.

Between the lines

Two capital raises within weeks, the second denominated in US dollars after a dinar-denominated debut, suggest a widening of the investor base rather than a repeat of the same trade. Hard-currency AT1 sukuk typically target international accounts that local-currency paper cannot reach. The investment-grade ratings from all three agencies give the bank room to price a perpetual, loss-absorbing instrument without an unusual concession.

What's next

Watch for a formal launch announcement, disclosure of the final size against the $500 million ceiling, coupon pricing and the first call date, and any agency assessment of the instrument itself once terms are published.

Source: ZAWYA