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UAE insurer ADNIC’s $106 million convertible bond fully subscribed

Abu Dhabi National Insurance Company’s (ADNIC) 390 million dirham ($106 million) convertible bond was fully subscribed and will be listed before the end of the month, the arranger said on Wednesday.

The transaction is one of the first dirham-denominated convertible bonds to be openly sold to local investors, according to the arranger.

Convertibles are rare in the Gulf region, with deals mostly used as a way for a strategic shareholder to either enter or strengthen an existing position, although there have been a couple of examples of dollar-denominated transactions sold to international investors.

ADNIC’s three-year bond opened for subscription by United Arab Emirates nationals on May 24 and closed on June 6 with an issue price of 1.04 dirhams ($0.28). It carries an interest rate of 7.5 percent per annum.

“The bond was fully subscribed and allotment should be on June 13 with filing for listing on Abu Dhabi Securities Exchange on the same day,” Majd Maaitah, head of securities at National Bank of Abu Dhabi (NBAD), told Reuters.

The listing will take place before the end of June, he said.

NBAD was the arranger of the issue, with law firm Hadef & Partners advising ADNIC.

ADNIC, owned 23.8 percent by state-owned fund Abu Dhabi Investment Council, has been seeking to strengthen its capital position since the middle of last year and confirmed in January plans to issue the convertible instrument.

Like many UAE insurers, ADNIC has struggled to maintain profitability in the face of difficult market conditions. It made a profit of 39 million dirhams in the first quarter of 2016 after posting net losses in four of the previous five quarters.

“This capital boosting measure is mainly for ADNIC to maintain its ratings and the high interest rate is to compensate subscribers and shareholders for the recent weak years,” said Maaitah.