Bank Sukuk – GIB KSA Debut SAR1.5bn (US$400m) Sukuk

New Entrant Gulf International Bank (GIB Saudi Arabia) Issues Maiden SAR1.5bn (US$400m) Tier II Sukuk to Finance its Ambitious Growth Strategy in Saudi Arabia especially in Infrastructure Projects

There is no escaping the footprint of the Saudi state and its agencies in proactive Sukuk origination, for which 2023 was a bumper year. The Saudi subsidiary of Gulf International Bank (GIB KSA) is the latest bank to successfully raise SAR1.5 billion (US$400 million) through a debut 10NC5 Tier 2 Sukuk issuance.

GIB KSA is a subsidiary of GIB, a pan-Gulf Cooperation Council (GCC) universal financial institution owned by the governments of the GCC countries, with Saudi Arabia’s Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund being the main shareholder. GIB Saudi Arabia is headquartered in Al Khobar and has branches in Riyadh and Jeddah with its Riyadh based subsidiary GIB Capital managing the transaction.

The Sukuk was issued under the Bank’s newly stablished SAR3 billion (US$800 million) Tier 2 Sukuk Issuance Programme, which according to GIB KSA is aligned with the Bank’s strategic objectives to facilitate balance sheet growth and actively contribute to the realization of the national economic objectives outlined in the Kingdom’s Vision 2030.

Diversifying Funding Sources

According to GIB Group Chief Executive Officer Abdulaziz Al-Helaissi, “the successful Tier 2 capital issuance represents a significant milestone for GIB KSA. The Sukuk Programme will play an integral role in diversifying our funding sources and fuel the bank’s expansion initiatives as the Bank seeks to capitalise on growth opportunities in the Kingdom. The strong investor support is a testament to the strength of GIB KSA’s credit story and its growth strategy. We are delighted to receive such a strong endorsement from the local Saudi capital markets.”

GIB KSA had mandated its investment banking entity GIB Capital to act as the sole arranger of the SAR3 billion Sukuk Issuance Programme and the Bank’s subsequent debut Sukuk issuance. According to GIB Capital’s Chief Executive Officer Osamah Shaker, “the successful issuance highlights our capability to help issuers access a wide investor base and provide robust execution advice to navigate challenging market conditions.”

On the back of this debut Sukuk issuance, GIB’s Islamic finance profile has in recent months increased markedly especially through the provision of Syndicated Murabaha financing facilities to GCC-based entities and projects. In November 2023, GIB KSA successfully amended, extended and closed an existing dual tranche hybrid Sustainability-linked Syndicated Murabaha and Conventional Term Facility of US$2.2 billion for Bapco Energies, the integrated state-owned energy company leading the energy transition in Bahrain.  

Under the updated and extended transaction, a new additional US$300 million green shoe option has been incorporated thus bringing the total upsized aggregate facility size to US$2.5 billion. GIB and Mashreq acted as the Initial Mandated Lead Arrangers and Bookrunners, and Sustainability Coordinators, and together with Al Ahli Bank of Kuwait (ABK) also as the Underwriters of the transaction.

The Sustainability-linked facility, according to Bapco Energies received strong participation from 19 conventional and Islamic financial institutions across Bahrain, Saudi Arabia, the United Arab Emirates, and Kuwait. Under the amended facility, the maturity date has been extended from 2026 to 2030. Additionally, the sustainability-linked KPIs, covering emissions intensity and health and safety, have been amended to further align with best practices as well as the definitions of the International Association of Oil & Gas Producers (IOGP) and Bapco Energies’ newly issued Sustainability-linked Financing Framework.

According to the Group Chief Executive Officer of Bapco Energies, Mark Thomas, “as we progress in reshaping the energy landscape of the Kingdom of Bahrain, we remain committed to contributing to the national net-zero target by 2060. This amend and restate agreement demonstrates the trust of the investment community in our journey towards a low-carbon future.”

Both GIB and Mashreq stressed their commitment to leading Bahrain’s transition to net zero. “We are committed to working with our clients to ensure they have access to the funding required to progress this journey and, in particular, working with them to incorporate a greater level of green financing into their overall funding profile. Closing of this landmark transaction is an important milestone for the sustainable finance landscape in the Middle East. This Sustainability-linked facility further incentivizes all parties to accelerate the progress towards a cleaner and more sustainable future and emphasises our dedication to ESG principles in the GCC.”

Murabaha Facility

GIB KSA in December 2023 also signed a signed a SAR800 million (US$213.32 million) Murabaha facility agreement with The Helicopter Company (THC), wholly owned by PIF, to support THC’s aircraft and infrastructure investments in Saudi Arabia. THC is the Kingdom’s premier provider of commercial helicopter services.

The Murabaha financing facility, according to GIB KSA, represents a substantial boost for THC’s financial capabilities and is structured with a long term repayment period of 10 years. This extended repayment period is tailored to THC’s evolving business requirements, ensuring that the funding acquired enables the company’s strategic vision and aspirations. With this financing solution in place, THC will be well-positioned to address both its long-term and short-term financing needs efficiently, fostering a brighter future for the general aviation industry in Saudi Arabia.

“The funds from this financing facility will support THC’s ongoing investments in high quality cutting-edge aircraft and infrastructure, contributing to the development of Saudi Arabia’s aviation sector in line with Vision 2030,” said Captain Arnaud Martinez, CEO of The Helicopter Company. “THC has been growing at an unprecedented scale with ambitious plans of managing a fleet of 100+ by 2026. We are actively shaping an ecosystem in the Kingdom that did not exist four years ago and this partnership with GIB-Saudi Arabia not only helps us pursue our strategic goals and reach profitability, but also symbolizes the strength of collaboration and our shared vision for the future of aviation in the Kingdom,” he added.

For the nine-month period ended 30th September 2023, GIB Group reported a substantial 141% growth in net profit attributable to shareholders, reaching US$122.4 million compared to US$50.7 million in the same period in 2022. The Group’s net income reached US$146.4 million, marking a 125% increase compared to US$65.2 million for the corresponding period.

Total shareholders’ equity, excluding minority interest, increased by 6% during the period to reach US$2.3 billion (compared to US$2.2 billion as of December 31, 2022), including reserves of US$220.0 million, which represent 11% of capital, and retained earnings of US$127.7 million, representing 6% of capital. At end September 2023, consolidated total assets amounted to US$46.1 billion, a 41% increase from the December 2022 level of US$32.6 billion; customer deposits reached US$33.5 billion; cash and other liquid assets reached US$24.7 billion.

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