Shuaa Capital, a prominent investment bank based in Dubai, has solidified plans to issue two mandatory convertible bonds (MCBs) amounting to a combined value of up to $175 million. This issuance strategy signifies a potential turnaround for the bank as it seeks to bolster its capital base.
The smaller of the two MCBs, valued at up to AED 367 million (roughly $100 million), will be offered exclusively to existing bondholders of Shuaa's recently matured bond. This bond's maturity was extended by five months before expiring at the end of March 2024. The issuance is expected to take place by, or before, March 31, 2025, through a special purpose vehicle (SPV) affiliated with Shuaa Capital.
Details regarding the issuance timeline for the larger MCB tranche, valued at up to AED 275. 5 million (approximately $75 million), are yet to be finalized. Shuaa Capital has revealed that this tranche will be issued through a private placement, subject to mandatory regulatory approvals and shareholder consent. The conversion price for this issuance will be determined by an independent financial advisor, whose appointment is still pending.
This dual issuance plan has been met with cautious optimism by Shuaa's existing bondholders. A bondholder, who spoke to a financial news publication on condition of anonymity, characterized the issuance of new MCBs to existing holders as a positive development and a potential indicator of the bank's financial recovery. The additional capital from a new strategic shareholder, anticipated for the larger tranche, is also seen as a promising sign for Shuaa's future.
Shuaa Capital's decision to issue MCBs reflects a broader trend within the UAE's financial sector. MCBs, which combine features of both bonds and stocks, have emerged as a popular tool for companies seeking to raise capital while offering investors the potential for capital appreciation through conversion into equity.
The successful issuance of these MCBs could pave the way for Shuaa Capital to solidify its financial footing and pursue future growth strategies. The bank's ability to attract a new strategic shareholder will be a crucial factor in determining the overall success of this capital-raising initiative.