Strategic Initiative to Optimize Capital Structure

The National Bank of Kuwait (NBK), one of the Middle East’s leading financial institutions, announced a significant tender offer inviting holders of its $750 million outstanding Perpetual Tier 1 Capital Securities to tender their notes for cash. The move, disclosed on June 30, 2025, forms part of NBK’s broader strategy to manage its capital efficiently and maintain a robust capital base, aligning with the evolving requirements of international banking regulations and investor expectations.

This offer provides existing securityholders with an opportunity to monetize their holdings, as NBK heads toward issuing a new series of capital securities. The bank’s management stated that the primary motivation is the prudent refinancing of its Additional Tier 1 (AT1) capital, ensuring continued strength and resilience in its financial position amid changing market dynamics.

Details of the Tender Offer

The tender offer is open to all holders of the existing US$750 million Perpetual Tier 1 Capital Securities (ISIN: XS2010037922 [Reg S] and US62878WAA62 [Rule 144A]), originally issued by NBK Tier 1 Financing (2) Limited and fully guaranteed by NBK. Securityholders are invited to submit their tenders by 5:00 PM (New York City time) on July 8, 2025, with a guaranteed delivery period extending to 5:00 PM on July 9, 2025. The minimum denomination for tenders is $200,000, with increments in multiples of $1,000 thereafter.

Accepted notes will be repurchased at a fixed price of $1,000 per $1,000 in principal amount, plus accrued interest, if applicable. Securities purchased through the offer will be cancelled, reducing the outstanding capital securities in the market and strengthening NBK’s capital efficiency.

The completion of the tender offer is conditioned upon the successful issuance of a new series of capital securities, an approach increasingly adopted by regional and global banks to efficiently rollover and optimize their capital base in line with Basel III requirements.

Market Context and Rationale

Over the past decade, perpetual or AT1 instruments have become vital tools for banks looking to maintain strong capital ratios and meet Basel III regulatory requirements. As global interest rate environments and investor appetites shift, institutions are frequently undertaking liability management exercises—such as tender offers or capital restructurings—to reduce financing costs, address potential call risks, or adapt to new regulatory frameworks.

NBK’s tender is part of a broader trend among Gulf and international banks. In recent years, institutions such as Emirates NBD and Qatar National Bank have similarly refinanced their perpetual AT1 securities, often tapping investors through new issues at prevailing market rates. As of mid-2025, the region’s banking sector remains robust, buoyed by strong liquidity and high demand for high-quality debt among global investors, despite a backdrop of global monetary tightening and recalibrated risk premiums.

The move reflects NBK’s proactive stance in managing its liabilities, maintaining investor confidence, and ensuring optimal capital allocation as it looks to drive growth across its retail, corporate, and international segments.

Implications for Securityholders

Securityholders who elect to participate in the tender offer will receive immediate liquidity at par value, plus any accrued interest. In addition, NBK has indicated that those who tender their existing notes may receive preferential allocation if they wish to invest in the new issuance—a common practice designed to reward existing investors and encourage participation in refinancing transactions.

The offer is managed by leading global and regional investment banks, including Citigroup Global Markets, HSBC Bank, J.P. Morgan Securities, and Standard Chartered Bank, with Kroll Issuer Services acting as the information and tender agent. Securityholders are advised to consult their advisers and carefully review the tender offer memorandum for full terms, eligibility, and procedural details, noting that deadlines imposed by custodians or intermediaries may precede the official NBK deadlines.

NBK’s Market Position and 2025 Outlook

NBK is recognized as Kuwait’s largest financial institution, boasting assets exceeding US$120 billion as of Q1 2025. The bank is a key pillar in the Gulf’s regional financial system, serving major corporate, sovereign, and retail clients across the Middle East, North Africa, Europe, and Asia. In 2024, NBK reported a net profit of over $1 billion, maintaining strong credit ratings from Moody’s (A1), Fitch (A+), and S&P (A).

As the global financial environment navigates persistent geopolitical uncertainties and evolving regulatory expectations on AT1 capital, NBK’s decision to optimize its capital stack through a timely tender offer and new issuance reflects prudent balance sheet management. The transaction is expected to preserve NBK’s strategic flexibility and solidify its reputation for conservative, proactive risk management as it pursues continued growth in core and emerging banking markets.

Key Timeline

• June 30, 2025: Commencement of the Tender Offer and release of the Tender Offer Memorandum.
• July 8, 2025 (5:00 PM NY time): Expiration deadline for tender submissions.
• July 9, 2025: Announcement of tender results and deadline for guaranteed delivery.
• July 10, 2025: Expected settlement date, subject to completion of new capital securities issuance.

All processes are subject to adjustment at the discretion of NBK, as outlined in the official memorandum.

Global Regulatory and Distribution Considerations

NBK’s offer is subject to a range of regulatory and distribution restrictions, in compliance with U.S. and international securities laws. The new capital securities will not be offered within the United States unless meeting registration exemptions, and distribution is limited in select jurisdictions, including the UK, France, Belgium, Italy, and Kuwait. Full details are included in the offer and distribution restrictions in the Tender Offer Memorandum.

Each securityholder is advised to independently assess all risks and implications, consulting with financial, tax, and legal advisers to make informed decisions per their circumstances.