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HSBC, NCB close $4.05bn Saudi bond

Jeddah, October 7, 2013

Leading banks HSBC and NCB Capital have successfully completed the SR15.21 billion ($4.05 billion) Islamic bond for the Saudi Arabian General Authority of Civil Aviation (GACA).

The largest-ever government guaranteed Islamic bond in the kingdom, the sukuk achieved a profit rate of 3.21 per cent annually, said the banks who acted as the joint lead managers and bookrunners for the transaction.

Additionally, HSBC acted as the sukuk co-ordinator, sole Shari'ah co-ordinator, sukuk holders' agent, and payment administration agent, while Standard Chartered Saudi Arabia was the co-lead manager for the issuance.

Commenting on the feat, Walid Khoury, the CEO of HSBC Saudi Arabia said: “This is the second great achievement for GACA, and stands as a testament of the confidence local investors have in this high quality name. Not only did it raise SR15.21 billion for the authority, but it’s done so at an attractive annual profit rate of 3.21 per cent with a diverse set of investors participating."

NCB Capital CEO Jawdat Al Halabi expressed delight at having jointly led this strategic transaction in support of the government’s plans to expand the Kingdom’s infrastructure.

"The sukuk market, both globally and in Saudi, has been gaining momentum in recent years and we see this trend continuing and reflected in the huge demand by investors for this issue," he observed.

This deal was 1.9 times oversubscribed with strong demand from a wide range of investors including banks, sovereign funds, pension agencies, insurance companies and corporates, said Al Halabi.

This diversity of investors means that any subsequent issuance won’t be over reliant on any one sector and GACA could tap into a ready investor base. This sheer scale of the demand and the eventual pricing demonstrates the confidence buyers have in both the region and its government, he added.

HSBC's Saudi head of capital markets & corporate finance Fahad Alsaif pointed out that many sukuks of this size are issued in multiple tranches, with different prices and dates of maturity.

"However, this has been launched as one single issuance, and in doing so has become the largest single-tranche sukuk ever issued in Saudi Arabia,” he noted.

NCB Capital head of Investment Banking Hicham Hatoum said the fact that the largest ever rial issue attracted a demand of this magnitude was a testament to the lead managers’ joint drive to diversify the targeted investor base.

Standard Chartered Capital CEO Dr Boutros Klink pointed out that the Saudi debt capital markets were fast growing and an issuance of this scale demonstrated the depth of the market.

"We look forward to becoming an active participant in developing the Kingdom’s debt capital markets and are thankful to the Authority for giving the opportunity to contribute to the success of this transaction," he added.

Additionally, this issuance has also been approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero risk weighting for capital adequacy calculation purpose, remarked Blink.

This means that investors can not only hold this sukuk as an investment, but also use it as an effective liquidity tool by using it to guarantee cash from the central bank, he added.-TradeArabia News Service

Tags: Saudi | sukuk | Islamic bond | NCB |

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