Khobar – Saudi Arabia will raise $8 billion (SAR30 billion) in its first global Islamic bond issue, with an order book from investors in excess of $33 billion (SAR123 billion).
The government is selling the five-year sukuk tranche at 100 basis points over the mid-swap rate and the 10-year tranche at a spread of 140 basis points to the benchmark, Bloomberg reported.
Saudi Arabia is tapping international and domestic markets to help finance a budget deficit that may reach $53 billion this year. The kingdom raised $17.5 billion in October in the biggest ever bond sale from an emerging-market nation.
Finance Analyst Mohammed al-Ramadi told Asharq Al-Awsat: “It seems that the government has raised prices because the structure of sukuks is hybrid and also there are other issuances in the region, such as the Kuwaiti bonds.”
Around 51 percent of the bonds will be used in bidding, while the remaining 49 percent will be used in facilitating usury.
Citi, HSBC and JP Morgan are the global coordinators, along with BNP Paribas, Deutsche Bank and NCB Capital as joint lead managers and bookrunners. Saudi Arabia is rated A1 by credit rating agencies Moody’s and A+ by Fitch.
Initial price guidance, released on Tuesday, put the Islamic bonds at around 115 bps and 155 bps over mid-swaps of the 5-year and 10-year tranches, respectively, revealed Reuters. Investors said that the price dropped 10 basis points on Wednesday, which means the Islamic bonds are still in an acceptable rise compared to traditional issuances.