Doha Bank’s board of directors outlines the plan for the $2bn debt notes before shareholders at the AGM. The capital raising would also enable the bank to meet the regulatory requirements arising from the Basel III ratios and improve the liquidity and interest profile of the bank.

By Santhosh V Perumal
Business Reporter

Doha Bank, which prefers an organic route, has received shareholders approval for the $2bn multi-tranche debt notes ‘bonds’, the first of which is expected to hit the market either this month or early next.
The bond issue (using Euro Medium Term Note programme), with no single deal exceeding $750mn, comes as part of its efforts to fund Qatar’s long term projects. It otherwise would have been difficult due to shorter liabilities of customer deposits whose maturity do not exceed one year.
The bonds would have maturity not exceeding 10 years for senior debt and 30 years for private placements and are to be issued either by a special purpose vehicle (Cayman Island-based Doha Finance) or Doha Bank directly. The maturity of this instrument would be perpetual but callable only after six years and would carry a fixed interest rate. After the initial six year period, the interest rate will be reset according to a pre-agreed price adjustment mechanism, factoring in the prevalent reference rate at that time.
“To fund long-term growth and projects in the country, the banks need to have a medium and long-term stable funding base. Since deposits are the only funding source available in the country – which are generally short term - the international market presents itself as the best alternative,” Doha Bank chairman Fahad bin Mohamed bin Jabor al-Thani said.
The capital raising would also enable the bank to meet the regulatory requirements arising from the Basel III ratios and also improve the liquidity and interest profile of the bank. The notes will qualify as additional Tier I capital for the bank.
Finding that major central banks across the globe have adopted economic easing policies and have been cutting down interest rates, Sheikh Fahad said the US Federal Reserve has now indicated the increase in rates in the coming months.
“Australian dollar and Swiss Francs present an opportunity for issuance at tighter levels than the US dollar with more investor appetite for Qatar-based issuers, hence could be a possible option for issuance,” he said.
Doha Bank Group CEO R Seetharaman said the bank has multiple options and the funds could come from the local market, which have abundant liquidity, through private placements to government-related entities or other institutional investors from Qatar.
The bank, he said, has already discussed the bond issue with the Ministry of Economy and Commerce as well the Qatar Central Bank.
On the debt notes, Sheikh Fahad said the obligations of the issuer will be direct, unsecured, conditional and subordinated, implying these instruments would be ranked junior to all other senior debt bonds and senior to the ordinary shares (common equity) of the issuer.
The extraordinary general assembly also approved the amendment to bank’s Articles of Association to enable foreign ownership limit to more than 49%, based on the Ministerial Cabinet’s approval recommended by the minister. The citizens of the Gulf Co-operation Council shall be treated like Qatari nationals in owning the shares of the bank.
On India operations, Seetharaman said the bank is waiting for the protocols and very soon it will be officially opened.