Complex Made Simple

Emirates Development Bank gets into debt finance to fund more UAE businesses

EDB asked for $750 million and eventually got it, no problem, as the bank’s debt was assigned the fourth-highest investment grade from Fitch Ratings.

EDB has a $3billion Euro Medium Term Note (EMTN) program EDB will launch a $272 mn investment fund for start-ups and SMEs in 2022 targeting industries EDB recently signed an agreement with Beehive, the UAE’s first Peer-to-Peer (P2P) lending platform

It was Bloomberg that broke the news that Emirates Development Bank (EDB) hired Emirates NBD Capital, Standard Chartered Bank, Goldman Sachs Group Inc., and Industrial and Commercial Bank of China to arrange investor calls for its second international bond sale.

EDB asked for $750 million and eventually got it, no problem, as the bank’s debt was assigned the fourth-highest investment grade from Fitch Ratings.

The proceeds would go toward supporting companies in sectors considered a priority for the economy. 

EDB sold its first debt in 2019.  

Gulf News was among the UAE dailies that announced EDB had in fact closed its 5-year bond issue, priced at a fixed re-offer yield of 1.639% per annum in the Regulation S markets. 

EDB has a $3 billion Euro Medium Term Note (EMTN) program as part of the bank’s mandate to boost its accessibility to capital markets and strengthen its funding profile.

The order book for the bond issue reached over $3bn and was 4 times oversubscribed.  

“This bond issue enhances our financing capabilities and progress towards implementing the bank’s new strategy, which aims to support the country’s economic diversification plans empowering individuals, small and medium-sized enterprises, and large corporates in priority industrial sectors,” said Dr. Sultan bin Ahmed Al Jaber, Minister of Industry and Advanced Technology and chairman of EDB.

In April this year, Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, approved the EDB’s strategy which includes a financing portfolio of 30bn dirhams ($817 mn) to contribute to financing more than 13,500 SMEs and creating 25,000 jobs over the next five years.

EDB recently signed an MoU with the Commercial Bank of Dubai (CBD), wherein EDB will provide the credit guarantee or co-lending program to CBD SME customers. CBD can offer up to 10 mn dirhams ($2.72 mn) financing to an SME, and 50% of the facility amount will be either guaranteed or co-lent by EDB.

Earlier, EDB signed a similar agreement with RAKBANK.

Read: MENA startups raising funds in April 2021: Part I of III

Read: MENA startups raising funds in April 2021: Part II of III

Read: MENA startups raising funds in April 2021: Part III of III

Financing industrial companies

According to Khaleej Times, EDB will launch a 1 billion dirham ($272 mn) investment fund for start-ups and SMEs in 2022 and will target industrial companies in priority sectors that need financing and investment.

The EDB Strategy is part of “Operation 300bn” which was launched in March 2021.

Since its inception, EDB has supported 550 companies, allocating 1.8 billion dirhams ($490 mn) in business loans to SMEs. The bank provided housing loans worth 2.4 billion dirhams ($654 mn), besides its $750 mn 5-year Senior Bond under a $5 bn program.

EDB will also complement its offering to companies and entrepreneurs with training, counseling, and guidance for UAE citizens and residents.

Dr Sultan Al Jaber said: “EDB will provide other tools including supply chain support, project financing, long-term financing, business accelerators, equity capital financing, and a business growth support fund.”

EDB priorities, according to Al Jaber, include establishing partnerships with UAE banks to extend financial services to small and medium industrial companies and increasing its direct financing by 73% in 2021 to support priority sectors, while also focusing on underserved sectors with extensive financial solutions.

P2P agreement with Beehive

Meanwhile, EDB recently announced that it has signed an agreement with Beehive, the UAE’s first Peer-to-Peer (P2P) lending platform, to expand funding options for SMEs.

 As an institutional investor, EDB has initially assigned 30 million dirhams ($8.17 mn) in funding via the Beehive platform to qualifying businesses. For its part, Beehive will facilitate business loans to creditworthy SMEs looking to expand operations or improve working capital.

The EDB strategy aims to help SMEs boost their contribution to UAE’s non-oil GDP to over 70% by the end of 2021.

The Beehive platform uses crowdfunding technology to connect SMEs looking for finance with a crowd of investors who can support their finance requests, whilst earning attractive returns. In addition to its network of retail investors, Beehive has adapted its business model to include institutional investors in order to increase liquidity and the speed of funding for its businesses.