The GCC’s Largest Integrated Dairy and Food Producer and Exporter Almarai Company Returns to International Market with Benchmark US$750m Senior Murabaha/Ijarah Sukuk
The Saudi-based Almarai Company, the largest integrated dairy and food producer and exporter in the Gulf Cooperation Council (GCC) region, successfully closed its latest Sukuk issuance – a benchmark US$750 million fixed rate RegS Senior Unsecured Murabaha/Ijarah Sukuk on 25th July 2023.
In a disclosure to Tadawul, the Saudi Stock Exchange, Almarai confirmed its intention to issue a US dollar denominated Sukuk in the international market in July 2023 under its US$2 billion Trust Certificate Issuance Programme, following earlier approval from the regulatory authorities and its shareholders to issue Senior Sukuk subject to market conditions.
The Sukuk certificates were issued by Almarai Sukuk Limited (ASL), incorporated in the Cayman Islands, on 25th July 2023. ASL acted as Trustee, Purchaser (under the Master Purchase Agreement), Lessor and Seller (under the Master Murabaha Agreement), on behalf of Almarai Company, the Seller (under the Master Purchase Agreement), Lessee, Servicing Agent, Obligor and Purchaser (under the Master Murabaha Agreement).
Almarai mandated HSBC and Standard Chartered Bank to act as global coordinators and arrangers of the transaction, to be joined by Citigroup, Dubai Islamic Bank and JP Morgan to also act as joint lead managers and bookrunners and to arrange a series of investor calls and meetings with qualified institutional investors in the GCC countries, Europe, Asia and US Offshore accounts.
The Sukuk, which has a tenor of 10 years, was priced at a profit rate of 5.233% per annum payable semi-annually starting from the settlement date of 25th July 2023.
Prior to this latest foray into the international market, Almarai issued a benchmark US$500 million fixed rate RegS Senior Unsecured Sukuk with a tenor of 5 years on 27 February 2019 which was priced at a fixed profit rate of 4.311% per annum.
Almarai Company is a frequent user of Islamic finance especially syndicated Murabaha facilities, revolving Murabaha credit facilities and regular issuer of Sukuk albeit mainly denominated in Saudi riyal.
In a disclosure to Tadawul (the Saudi Stock Exchange), the company thanked its investor base, “specifically all the Sukuk holders who participated in the series, for repeatedly placing their trust in the Company, its board and its management.” Almarai confirmed that it intends “to utilize Sukuk proceeds to help finance its capital investment programme as part of its funding diversification strategy and for general corporate funding purposes”.
This latest US$750 million international Sukuk was similarly issued under Almarai Company’s US$2 billion Trust Certificate Issuance Programme, which was established by Almarai Sukuk Ltd, a wholly-owned special purpose vehicle established in the Cayman Islands by Almarai Company, to which Moody’s Investors Service has assigned a Baa3 senior unsecured rating with a Stable outlook, which is the same as the long-term issuer rating of Almarai.
Under this Programme, said Moody’s in its Rating Rationale, “the proceeds of the issue of the future certificates will be used by Almarai Sukuk Ltd (in its capacity as the Issuer) to acquire a portfolio of assets comprising no less than 34 per cent of the aggregate face amount of the certificates in tangible assets from Almarai and no more than 66 per cent of the aggregate face amount of the certificates in Sharia’a-compliant commodities to be sold to Almarai on a deferred payment basis for a deferred sale price pursuant to the terms of the Master Murabaha Agreement.”
The portfolio will be managed by Almarai as the servicing agent on behalf of the Issuer. Under the service agency agreement, “Almarai as the service agent retains any responsibility with regards to the lease assets, including their maintenance and insurance.” The stable outlook, added Moody’s, “reflects our expectation that Almarai’s credit profile will be able to withstand the current adverse market conditions without breaching the current rating category guidance.”
Almarai is the Middle East’s leading food and beverage manufacturer and distributor, and the world’s largest vertically integrated dairy company. The group is active in five sectors across the Middle East and North Africa (MENA) region: dairy (liquid and foods), juice, bakery, poultry and infant nutrition. Its major brands include Almarai, L’Usine, 7 Days and Alyoum.
Almarai reported interim unaudited results at end June 2023 of total assets of SAR33.61 billion compared with SAR32.07 billion for the same period in 2022. Revenues for the same period increased to SAR9.86 billion in 2023 from SAR9.11 billion in 2022. Profit for the period after tax and Zakat, totalled SAR1.19 billion in 2023 compared with SAR948.61 million for the same period in 2022.
The Sukuk certificates, rated Baa3 (Stable) by Moody’s Investors Service and BBB- (Stable) by S&P Ratings, have been admitted for listing and trading on the Global Exchange Market of the Irish Stock Exchange trading as Euronext Dublin.