Fitch affirms Global and NBQ on 20% acquisition plan

The support rating floor is affirmed at 'No Floor'. At the same time the agency affirmed the ratings of National Bank of Umm Al-Qaiwain (NBQ) at long-term IDR 'BBB+', short-term IDR 'F2', individual 'C/D' and support '2'. The support rating floor is affirmed at 'BBB+'. This follows the announcement that Global would potentially acquire a 20% stake in NBQ.

The terms of the transaction are likely to see Global being the sole subscriber to an Dhs2.36bn convertible debt instrument issued by NBQ. The intention is for mandatory conversion (in 30 days) of the debt instrument into 330 million new shares of NBQ, giving Global a 20% equity stake. Global is currently conducting due diligence on NBQ and is seeking regulatory approval for the transaction.

This would be a substantial transaction for Global, representing around 12% of the company's assets and 25% of equity. Global will use the relationship with NBQ as a platform for distributing its asset management and corporate finance products in the UAE. However, NBQ currently has a limited franchise in the UAE and synergies realised from this transaction may be small. Global has assessed this transaction on a stand-alone basis and views it to be profitable in the medium term.

This transaction would significantly improve NBQ's capitalisation, roughly doubling its equity base. Fitch expects NBQ to use this capital to fund rapid growth, primarily in the UAE market.

Global was established in Kuwait in 1998. Its activities include asset management, investment banking, brokerage, real estate and research. It has operations in 16 countries, in the GCC (UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait) and elsewhere in MENA, Pakistan, India and Hong Kong, either through its own offices or through associates.

NBQ was established in 1982 by the ruler of the emirate of Umm Al-Qaiwain. NBQ is a small domestic bank in the UAE with an estimated market share of 0.8% of system assets at end-June 2008.