Sukuk issuance momentum in the Saudi Arabian banking sector continues in earnest underlining the fact that Sukuk issuance remains the preferred mode of fund raising, refinancing and Tier I capital boosting for major Saudi financial institutions.
The latest issuance is by Saudi Investment Bank (SAIB), which closed its second issuance in six months – a SAR500 million (US$133.23 million) Tier I Perpetual Sukuk on 31 January 2023. The first tranche – a SAR2 billion (US$530 million) Tier 1 Perpetual Sukuk was issued on on 29 June 2022.
In a filing to the Saudi Stock Exchange (Tadawul) this latest issuance like the first one was distributed by way of a private placement in Saudi Arabia to institutional and qualified local and foreign investors.
This second tranche was priced at a fixed profit rate of 6.25% per annum payable semi-annually from the issue date. this compared to the pricing of the first tranche which was tighter at a 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.
SAIB had earlier mandated Alistithmar for Financial Securities and Brokerage Company to act as the Lead Manager and Bookrunner to the transaction. Alistithmar was also the Lead Manager or the first tranche.
Prior to the launch of the second tranche, The Saudi Investment Bank announced that it has increased the size of its Tier 1 Capital Sukuk Issuance Programme from SAR2 billion to SAR5 billion following approval from its Board of Directors and the Capital Market Authority of Saudi Arabia.
Both Sukuk tranches have been issued under this Programme. According to SAIB, the proceeds will be used to “to enhance the Tier 1 capital and fulfil the Bank’s financial and strategic needs.”
At the same time The Saudi Investment Bank announces its intention to exercise its Issuer Call Option (in full) in respect of its SAR1 billion Additional Tier 1 Capital Sukuk issued on 21 March 2018 at face value on the First Call Date on 21 March 2023, following approval from the Capital Market Authority.
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
Meanwhile, two other Saudi corporates have announced their intention to issue Sukuk offerings in the riyal-denominated market in due course. They include Mohammed Hassan Al Naqool Sons Company and Alkathiri Holding Company following approval from the Capital Market Authority.
In a filing with Tadawul, Mohammed Hassan Al Naqool Sons Company confirmed that it intends to issue a Murabaha Sukuk through a public offering denominated in Saudi Riyals under its Murabaha Sukuk Issuance programme.
In an interesting development the company has appointed Sukuk Financial Company (SFC) to arrange, structure and distribute the Sukuk certificates “through offering them through the website of the SFC as authorized by the Capital Market Authority to offer and invest in debt instruments.”
Similarly, Al Kathiri Holding Company intends to raise SAR500 million through a Mudaraba/Murabaha Sukuk issuance issued by Special Purposes Entity Sukuk Al Kathiri, the special purpose entity incorporated in Saudi Arabia, under its SAR500 million Sukuk Issuance Programme.
The company has mandated Al Khair Capital (Saudi Arabia) as the financial advisor and sole arranger of the Programme and the issuance and offering of the Sukuk.
The proceeds from both issuances will be used for the general corporate purposes of the Company to meet their strategic objectives and business expansion plans.