Arab News, Thursday, Sep 13, 2018 | Muharram 3,1440
Saudi Arabia targets $2 billion with new Islamic bonds
Saudi Arabia has started marketing US dollar-denominated sukuk, or Islamic
bonds, with the issue expected to be around $2 billion in size, a document
showed on Wednesday.
It would be the kingdom’s second international sale of sukuk after a $9 billion
transaction last year. The exercise completes Saudi Arabia’s external funding
requirements for 2018, according to the document.
The kingdom, acting through the ministry of finance, started marketing the notes
with an initial price guidance of around 145 basis points over mid-swaps.
Citi, HSBC and JPMorgan are coordinating the transaction, and are joint lead
managers together with BNP Paribas, Mizuho and Samba Capital.
The structure of the sukuk is the same one adopted for the 2017 issue,
comprising a mudaraba agreement, a form of Islamic investment management
partnership, plus a murabaha facility that would trade commodities with a
special purpose vehicle.
The marketing exercise comes a day after sources told Reuters that Saudi Arabia
was planning to issue a new dollar sukuk shortly.
The sukuk, due to settle on Sept. 19 and with a January 2029 maturity, are
expected to price later on Wednesday, according to the document.
The government has raised a total of $50 billion in international notes, both
Islamic and conventional, since it started tapping the international debt
markets in 2016 as part of its efforts to diversify its oil-reliant economy.
In April the government sold $11 billion in conventional notes — an amount which
covered the country’s hard currency funding needs for 2018, the head of the
Saudi debt management office told Reuters after that bond issue.
But he said an international sukuk deal was on the cards for the second half of
this year in order to maintain the country’s presence in that market and to
provide supply to sharia-compliant investors.