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Saudi MoF Sustains Monthly Domestic Sukuk Issuance in November as Overall Volume Rises to Over SAR85bn (US$22.64bn) for the First Eleven Months of 2020

The National Debt Management Center (NDMC) of the Saudi Ministry of Finance (MoF) continued with its monthly domestic sovereign Sukuk issuance in November 2020 with a two-tranche offering totalling SAR794.5 million (US$211.79 million) on 25 November.

This is the eleventh consecutive monthly Sukuk issuance in 2020 under the NDMC’s 2020 Calendar of Local Sukuk Issuances, which envisages 12 consecutive monthly issuances of Saudi-riyal denominated sovereign Sukuk. No other jurisdiction is committed to such a dedicated domestic Sukuk issuance regime. In October, the NDMC raised SAR270 million (US$71.99 million) through the issuance of a two-tranche offering.

This latest Sukuk issuance in November 2020 also comprised two tranches:  

i) A 7-year Tranche I totalling SAR199.79 million (US$53.26 million) maturing on 27 July 2027 and priced at a fixed profit rate of 1.73% per annum and a yield of 1.85%. The auction attracted bids totalling SAR982.6 million (US$261.93 million).

ii) A 10-year Tranche II totalling SAR594.71 million (US$158.53 million) maturing on 23 March 2030 and priced at a fixed profit rate of 2.69% per annum and a yield of 2.4%. The auction attracted bids totalling SAR14,561 million (US$3,881.49 million).

The Saudi NDMC has a multi-pronged government-debt raising strategy, comprising raising more funds from the financial markets through increased domestic and international Sukuk issuances, in addition to international conventional bonds and drawing on their sovereign wealth fund assets. The Kingdom is by far the single most proactive sovereign domestic Sukuk issuer.

All the Kingdom’s sovereign domestic Sukuk issuances come under the unlimited Saudi Arabian Government Saudi Riyal (SR) denominated Sukuk Issuance Programme established on 20 July 2017 by the Ministry and updated on 20 July 2020 “to issue and offer, at its discretion, Sukuk in multiple issuances to investors, pursuant to the Royal Decree approving the National Budget.” The Programme, structured and lead arranged by Alinma Bank, according to the MoF, also comes as part of the DMO’s role in securing Saudi Arabia’s debt financing needs with the best financing costs and would contribute to the development of the Saudi Sukuk and Islamic Capital Markets.

The Saudi sovereign domestic Sukuk issuance is also driven by the high volume of trading of Sukuk certificates in the secondary market on Tadawul (the Saudi Stock Exchange) and allowing these certificates holders to benefit from the Zakat redemption applied within the framework of the local currency Sukuk issuance programme. The continued traction and upward growth trajectory of Saudi domestic Sukuk issuance is driven by robust investor demand and the emergence of tenors of up to 40 years, which is underlined by the high investor oversubscription.

According to data compiled by Mushtak Parker for this newsletter from MoF statistics, the NDMC issued in the first eleven months of 2020 consecutive monthly issuances under the Sukuk Issuance Programme totalling SAR50,393 million (US$13,433.13 million) with total bids amounting to SAR79,100 million (US$21,085.17 million).

These were Sukuk issued under the Government’s Sukuk Issuance Programme. However, Saudi Arabia also occasionally issues Saudi-riyal denominated Sukuk on a standalone basis. In July, for instance, the NDMC raised SAR34,645 million (US$9,236.77 million) from a four-tranche stand-alone auction. This means that the total domestic sovereign Sukuk issued by the Saudi government from January-November 2020 amounted to SAR85,038 million (US$22,638.35 million), which is almost a 50% increase on the previous year.

Saudi Arabia is ahead in tapping the domestic sovereign Sukuk market, because it has an established issuance infrastructure complete with a government policy framework under its Fiscal Balance Programme and Financial Sector Development Programme, whose objectives inter alia is to add to a diversified public debt fund raising strategy and to the development of the Saudi Sukuk and Islamic Capital Market.

Meanwhile the MoF signed agreements with Samba Financial Group, National Commercial Bank and Saudi British Bank in November to finance the ministry’s supply chain and comes under its framework of enabling financial institutions to support the growth of the private sector – a core pillar of the financial sector development programme.

According to Fahad Alsaif, CEO of NDMC, the agreements are aimed at improving the level of cash flow and liquidity in the financial sector and will, be implemented in two phases. The first phase begins with the payment of government agencies clients’ dues, after the NDMC and banks agreed on financial facilities through a quick payment system using “reverse factoring”. The second phase is more comprehensive as it includes the development of a full integrated programme between the Ministry of Finance and the participating financial institutions to automate all possible mechanisms/products to finance the supply chain.

Etimad (the government’s digital accreditation platform) will contribute to the development of the integrated programme with the financial institutions in the second phase. The product will help organize and accelerate payment processes and enhance partnership with commercial banks. Clients also will be able to submit their approved invoices to the funded bank through Etimad, at which point the amounts due will be deposited in their accounts and the Ministry of Finance will pay the value to the bank in the agreed period without any additional costs.

Saudi Sovereign Domestic Sukuk Issuance Jan-November 2020

Issuance Date 2020

Volume

Maturity Date

Tenor

Profit Rate/ Final Yield

Fixed Rate

Total Bids

 

22 January

 

 

Tranche 1 – SAR715m

Tranche 2 – SAR6,005m

27 January 2027

23 March 2030

 

7 years

10 years

2.47% pa/ 2.47%

2.69% pa/ 2.82%

 

SAR6,750m

19 February

Tranche 1 – SAR508m

Tranche 2 – SAR3,988m

27 January 2027

24 February

2035

 

7 years

15 years

 

2.47% pa/ 2.35

3.00% pa/ 3.00%

 

SAR4,496m

25 March

Tranche 1 – SAR169.5m

 

Tranche 2 – SAR504m

Tranche 3 – SAR14,894m

23 March 2025

 

23 March 2030

30 March 2050

 

5 years

 

 

10 years

30 years

 

2.17% pa/ 1.83

 

2.69% pa/ 2.64%

3.68% pa/ 3.68%

 

 

 

SAR16,424m

22 April

Tranche 1 – SAR1,300m

Tranche 2 – SAR4,250m

27 January 2027

24 February

2035

 

7 years

15 years

2.47% pa/

2.09%

3.00% pa/ 3.06%

 

SAR5,550m

13 May

Tranche 1-SAR3,805m

Tranche 1 – SAR1,950m

23 March 2025

23 March 2030

 

5 years

10 years

2.17% pa/ 1.76%

2.69% pa/ 2.38%

 

SAR5,755m

24 June

Tranche 1 – SAR2,494m

 

Tranche 2 – SAR3,670m

 

Tranche 3 – SAR2,331m

 

27 Jan 2027

 

23 March 2030

 

24 Feb 2035

 

 

7 years

 

 

10 years

 

 

15 years

2.47% pa/ 1.85%

 

2.69% pa/ 2.26%

 

3.00% pa/ 2.69%

 

 

 

 

SAR8,474m

27 July

Tranche 1– SAR452m

—————

Tranche 2 – SAR548m

23 March 2025

————

27 July 2027

 

 

5 Years

————

7 Years

 

2.17% pa/

1.43%

————–

1.73% pa/ 1.73%

 

 

SAR1,798m

24 August

Tranche 1 – SAR100m

—————-

Tranche 2 – SAR400m

 

 

26 July 2028

—————-

26 July 2035

 

 

8 Years

————-

15 Years

 

 

2.29% pa/ 2.13%

—————

3.10% pa/ 3.00%

 

 

 

SAR9,868m

16 September

Tranche 1 – SAR130m

——————

Tranche 2 –

SAR1,115m

 

26 July 2024

—————

26 July 2032

 

 

4 Years

————–

12 Years

 

1.64% pa/

1.50%

—————–

2.89% pa/ 2.75%

 

 

SAR12,400m

21 October

Tranche 1 – SAR235m

——————

Tranche 2 –

SAR35m

 

27 July 2027

—————

26 July 2032

 

 

7 Years

————–

12 Years

 

1.73% pa/

1.87%

——————-

2.89% pa/ 2.25%

 

 

SAR1,760m

25 November

Tranche 1 – SAR199.79m

——————

Tranche 2 –

SAR594.71m

 

27 July 2027

—————

23 March 2030

 

7 Years

————–

10 Years

 

1.73% pa/

1.85%

——————-

2.69% pa/ 2.40%

 

 

SAR5,925m

 

Total First Eleven Months 2020

 

SAR50,393m US$13,433.13m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SAR79,100m

US$21,085.17m

Source: Compiled by Mushtak Parker from Data of the NDMC, Saudi Ministry of Finance November 2020

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