Bahri and SAIB Return to Sukuk Market with Two Offerings in June/July 2022 Raising an Aggregate SAR5.9bn (US$1.57bn)

Sukuk issuance momentum in the Saudi Arabian corporate sector continued in June and July 2022, despite the Eid and Hajj break in early July, underlining the fact that Sukuk issuance remains the preferred mode of fund raising and refinancing for major Saudi companies.

The latest issuance is by the National Shipping Company of Saudi Arabia (Bahri), a global leader in logistics and transportation and a regular user of Islamic funding facilities, which returned to the Sukuk market on 16 July 2022 with a benchmark Saudi riyal-denominated 7-year senior unsecured SAR3.9 billion (US$1.04 billion) offering.

At end July 2022, Bahri announced the full redemption of its 7-year SAR3.9 billion Sukuk issued on 30 July 2015 which matured on 28 July 2022. The proceeds from this latest issuance were used to refinance the company’s 2015 SAR 3.9 billion Sukuk, said the company in a disclosure to Tadawul (the Saudi Stock Exchange).

The Sukuk was issued by way of a private placement offer at a competitive floating profit rate of 120 basis points above the 6-month Saudi Arabian Interbank Offered Rate (SAIBOR).

Bahri had mandated SNB Capital, Al Rajhi Capital, and HSBC Saudi Arabia as joint lead managers of the transaction, with HSBC also acting as the lead coordinator and payment agent.

According to Bahri, the Sukuk offering was targeted at Saudi institutional and qualified investors and attracted robust demand with the offer oversubscribed by 1.95 times. According to Ahmed Ali Alsubaey, CEO of Bahri, “this strategic transaction represents a key milestone for Bahri and highlights the confidence investors have placed in the company. It also complements one of the objectives of the Financial Sector Development Programme under Saudi Vision 2030 to develop and deepen the capital markets in Saudi Arabia and demonstrates our trust in the local debt markets by raising a significant amount of funds from various local investors.”

Despite the adverse market environment, Bahri’s Sukuk achieved almost two times oversubscription and was able to diversify away from traditional bank investors, and as a result, strengthened the quality of the order book by allocating a significant amount of the funds raised to asset managers, pension funds, and corporate investors.

“This excellent outcome,” stressed Fayez Al-Asmari, CFO of Bahri, “sends a positive note to investors and creditors that Bahri’s credit history is valued and endorsed by the investor community. Significant investor diversification was accomplished with sizable participation from key government Funds, asset managers, pension funds, and Islamic and conventional banks, with a final order book closing at a value almost doubling the expected one.”

In July 2022, Bahri announced encouraging financial results for Q2 2022, despite the ongoing impact of COVID-19 especially reduced global trade and demand, and the supply chain disruptions caused by the Ukraine conflict and the resultant global economic shocks of rising fuel and food prices and a global cost-of-living crisis.

The company reported a 133.93% increase in net profit after Zakat and tax in Q2 2022 to SAR192.92 million (US$51.34 million) compared with SAR82.47 million (US$21.95 million) for the same quarter in 2021. Revenues rose by 43.82% to SAR3,572.35 million (US$950.63 million) from SAR2,483.96 million (US$661 million) for the same period.

The reason of the increase in the net profit during Q2 2022 compared to the same quarter in the previous year, said the company, is the increase in revenues due to the improvement in multiple sectors especially in the oil transportation sector where its revenues increased by SAR607 million (US$161.53 million) as well as the chemicals transportation sector where revenues increased by SAR260 million (US$69.19 million), due to the improvement in global shipping rates, the increase in shipping operations and the expansion of the Bahri fleet.

Similarly, Saudi Investment Bank (SAIB) closed its latest Sukuk offering – a Saudi-riyal denominated SAR2 billion (US$530 million) Tier 1 Perpetual Sukuk on 29 June 2022. This issuance was also distributed via a private placement aimed at qualified Saudi investors. The transaction was priced at fixed 6.0% profit rate per annum payable semi-annually.

According to its disclosure to Tadawul, SAIB explained that the Sukuk are perpetual securities and accordingly do not have a fixed or final redemption date. However, they may be redeemed by the Bank in certain cases as detailed in the offering circular in relation to the Sukuk.

Alistithmar for Financial Securities and Brokerage Company acted as the Lead Manager and Bookrunner to the transaction.

In July 2022, SAIB announced encouraging financial results for first half 2022, despite the difficult market conditions.

The Bank reported a 21.22% increase in Net Profit in FH 2022 to SAR607.7 million (US$161.71 million) compared with SAR501.3 million (US$5133.4 million) for the same period in 2021. Total assets increased by 12.59 % to SAR110.8 billion (US$29.48 billion) from SAR98.41 billion (US$26.19 billion) for the same period.

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