Warba Bank raises 80 million dinars in 5.50% AT1 sukuk

Summary

• Warba Bank closed an Additional Tier 1 sukuk issue of 80 million Kuwaiti dinars.
• The profit rate was set at 5.50% annually, 200 basis points above the central bank discount rate.
• The pricing sets a live benchmark for Kuwaiti AT1 capital instruments.

The latest

Warba Bank has completed an 80 million dinar issue of sukuk qualifying as Additional Tier 1 regulatory capital, after upsizing the deal by 5 million dinars from an initial 75 million on demand gathered during the first week of marketing. The instrument carries a 5.50% annual profit rate and a call option after five years.

Details

• The size: The bank said the final issue size reached 80 million dinars, up from the 75 million dinars originally targeted. The 5 million dinar increase was made in response to orders received during the opening week of the marketing period, according to the bank's announcement.
• The pricing: The profit rate was fixed at 5.50% per year, equivalent to 200 basis points over the Central Bank of Kuwait's discount rate. That spread is the clearest reference point the deal leaves behind for how Kuwaiti banks are currently pricing their most subordinated capital.
• The structure: The sukuk are perpetual in nature as Additional Tier 1 instruments, with a call option exercisable after five years. AT1 is the loss-absorbing layer sitting directly above common equity in the regulatory capital stack, which is why investors are compensated with a wider spread.
• The arrangers: KFH Capital, Markaz and Warba Bank acted as joint lead managers and arrangers on the transaction. KFH Capital additionally served as subscription and settlement agent, handling the mechanics of allocation and closing.
• The buyers: Demand came from financial institutions, private banking clients and wealth management investors, according to the bank. The mix points to a domestic placement anchored in institutional and high-net-worth money rather than a broad international order book.
• The executives: Youssef Sharji, acting head of investment banking at Warba Bank, commented on the issue, alongside Mohammed Hamad Al-Hajri of KFH Capital and Ali Khalil, chief executive of Markaz.
• Not disclosed: The bank did not publish an oversubscription ratio for the offering, leaving the headline upsizing and the final 80 million dinar size as the only public measures of how the order book performed.
• The capital effect: The proceeds lift Warba's regulatory capital base, since AT1 sukuk count toward the bank's Tier 1 ratio under Basel-aligned rules applied by the Central Bank of Kuwait, supporting room for balance sheet growth without issuing new shares.

Background

Additional Tier 1 instruments were introduced globally after the financial crisis to force bondholders, not taxpayers, to absorb losses at a failing bank. Islamic banks replicate the structure in sukuk form to keep it Sharia-compliant.

Between the lines

The decision to upsize rather than tighten pricing is the most telling detail. Warba kept the rate at 200 basis points over the discount rate and took the extra 5 million dinars instead, a choice that fixes a visible spread benchmark for the next Kuwaiti AT1 issuer. The absence of a published coverage ratio leaves that spread, rather than demand data, as the market's reference.

What's next

The first call date falls five years from issuance, the point at which Warba decides whether to redeem or leave the sukuk outstanding. Near term, watch whether other Kuwaiti banks price AT1 deals at or inside the 200 basis point spread.

Source: Al-Anba (Warba Bank statement)