I am trying to analyse some financial news articles here.
By Euroweek Reporter
Qatar National Bank sold its debut $1.5bn five year Reg S only deal on Tuesday, with lead managers Barclays Capital, BNP Paribas, JPMorgan, QNB Capital and Standard Chartered building a book of $6bn for the note.
“The book wasn’t just quantity, it was quality,” said one bookrunner on the deal. “Many orders came in with a note attached making it clear the investors wanted a full allocation.”
QNB, rated Aa3/A+/A+, is the largest bank in Qatar. At the end of March, it had total assets of Qr183bn ($50bn), about 46% of the country’s banking assets.
“The deal is the largest ever trade in Reg S-only format from the Ceemea region,” said the bookrunner. “There’s a lot of cash out there but investors want to put it to work in blue-chip names, and investors like the Qatar credit story in general.”
The Qatari government owns half of the bank through its investment arm, Qatar Investment Authority, giving the institution a high probability of support from the state. The remaining 50% is publicly traded.
The deal was priced at 99.017 with a 3.125% coupon, and was trading on Wednesday (midday) around re-offer.
Investors used the Qatari sovereign rather than other banks in the region as the comparable issuer. The deal was priced with around a 25bp premium to where the lead managers calculated a new Qatar sovereign deal would price.
“It’s spectacular for QNB to be able to raise this volume of interest with a spread this tight in this kind of market where investors are being shown so many new deals,” said the bookrunner.
Moody’s said that the bank has good earnings power, strong efficiency levels and solid capitalisation.
Although it has historically been heavily dependent on business related to government and semi-government agencies, management has in recent years addressed this issue by focusing on the development of its private sector business, added Moody’s. The bank is also expanding its operations geographically, although this is at an early stage.
Challenges for the institution include funding and credit concentrations, and the increased competition that is putting pressure on the interest rate margins of all Qatari banks.
Qatar National Bank: Qatar National Bank (QNB), established in 1964 as the country’s first Qatari-owned commercial bank, has an ownership structure split between the Qatar Investment Authority (50%) and the private sector (50%).
Reg S: Regulation S is a "safe harbor" that defines when an offering of securities will be deemed to come to rest abroad and therefore not be subject to the registration obligations imposed under Section 5 of the 1933 Act.
The regulation includes two safe harbor provisions: an issuer safe harbor and a resale safe harbor.
Lead manager (Reuters): The bank awarded the mandate by a borrower to arrange the raising of money via a bond, a loan or a share issue.
The lead manager negotiates with the borrower or issuer, assesses market conditions and puts together the syndicate, which lends the money or underwrites the issue.
Also called syndicate manager, managing underwriter or lead underwriter.
Underwriter (Reuter): In a general sense, an underwriter is a person or company that assumes financial risk.
In financial markets an underwriter is a financial institution closely involved in the pricing and distribution of a new issue of a security.
In exchange for a fee, the underwriter guarantees to the company issuing the securities that it will receive a set price for a set volume of securities.
If there is insufficient demand the underwriter may have to sell them at a loss or retain them.
Underwriter (FT): A financial institution that underwrites a share issue, that arranges to sell shares to investors and agrees to buy any shares that are not bought by them.
Underwrite (FT):To guarantee against financial risk by assuming that risk, as financial institutions do when they offer (underwrite) an insurance policy, or when they buy a new securities issue from the issuer for re-sale to the public.
A new securities issue is normally underwritten by a group of investment banks (called the underwriting group or syndicate).
One bank, appointed by the group as lead manager, signs the underwriting agreement that specifies all the details of the issuer-underwriter relationship (including pricing), and handles other arrangements including distribution of the issue through dealers or other investment banks (the selling group).
The fee the underwriter earns is the spread (the underwriting spread) between the price it pays the issuer for the stock, and the price at which it re-sells the stock to the public (the issue or public offering price), either directly or through dealers.
Barclays Capital: In 1986 it became the first British bank to have its shares listed on the Tokyo and New York stock exchanges.
BNP Paribas: May 2000 witnessed the birth of France's premier bank, a new European leader in financial services. The creation of the BNP Paribas Group, led by Michel Pébereau then Chairman and CEO of BNP, was at that time the largest bank merger ever implemented in France.
JPMorgan: In 1799, The Manhattan Company, the firm's earliest predecessor institution, is chartered.
QNB Capital: QNB Capital LLC is wholly owned by QNB and authorised by the Qatar Financial Centre Regulatory Authority.
Standard Chartered: Standard Chartered was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China, founded in 1853.
Both companies were keen to capitalise on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods between Europe, Asia and Africa.
Book: record
Note: a piece of paper money.
Bookrunner: Primary issuance is arranged by bookrunners who arrange the bond issue, have the direct contact with investors and act as advisors to the bond issuer in terms of timing and price of the bond issue.
Aa3/A+/A+: In investment, the bond credit rating assesses the credit worthiness of a corporation's debt issues.
Blue-chip: According to New York Stock Exchange, a blue-chip stock is stock in a company with a national reputation for quality, reliability and the ability to operate profitably in good times and bad.
The Qatar credit story: The story of managing its credit (assets, money in bank etc).
Coupon: The coupon or coupon rate of a bond is the amount of interest paid per year expressed as a percentage of the face value of the bond. It is the interest rate that a bond issuer will pay to a bondholder.
The Qatari sovereign: focus on "autonomous"
bp: A basis point is a unit equal to 1/100th of a percentage point. Put another way: 1 bp = 0.01%
For example, if a report says there has been a "1% increase" from a 10% interest rate, this could refer to an increase either from 10% to 10.1% (relative, 1% of 10%), or from 10% to 11% (absolute, 1% plus 10%).
If, however, the report says there has been a "10 basis point increase" from a 10% interest rate, then we know that the interest rate of 10% (the "basis", if you will) has increased by 0.10% (the absolute change) to a 10.1% rate.
Premium: An extra payment added to the basic rate.
Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service, a Credit rating agency which performs international financial research and analysis on commercial and government entities.
The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. The company has a 40% share in the world credit rating market, as does its main rival, Standard & Poor's.
The interest rate margins: An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender.
For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for deferring the use of funds and instead lending it to the borrower.
Interests rates are fundamental to a capitalist society. Interest rates are normally expressed as a percentage rate over the period of one year.
Interest rates targets are also a vital tool of monetary policy and are taken into account when dealing with variables like investment, inflation, and unemployment.
Dealer: A person whose business is buying and selling a particular product.
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