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Saudi NDMC Completes Record SAR85bn (US$22.64bn) Domestic Sukuk Issuance Programme in 2020

The National Debt Management Centre (NDMC) of the Saudi Ministry of Finance (MoF) completed its domestic sovereign Sukuk issuance programme for 2020 in December.

In an unusual statement, the MoF confirmed that “with reference to the 2020 Local Sukuk Issuance Calendar, the NDMC announces the completion of receiving investors’ orders for the month of December 2020 under the Saudi Arabian Government SAR-denominated Sukuk Programme. The orders have reached SAR11,721 million. None of these orders were allocated due to the completion of the domestic borrowing plan for this year.”

Under its 2020 Domestic Sukuk Issuance Calendar, the NDMC had planned a two-tranche issuance – a 7-year and a 12-year offering – in December priced at a final fixed profit rate of 1.73% per annum and 2.89% per annum for the two tranches respectively.  In November 2020, the NDMC issued a two-tranche Sukuk offering totalling SAR794.5 million (US$211.79 million). No other jurisdiction was committed to such a dedicated domestic Sukuk issuance regime in 2020.

The NDMC also confirmed that its total funding plan for the year 2020, amounting to SAR220 billion, was also successfully completed, “through a diversified funding sources which include domestic and international Sukuk and bond issuances as well as new financing channels, which is including Government Alternative Financing, Supply Chain Financing, in addition to unifying the domestic issuances programmes.”

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 2020 domestic Sukuk totalling SAR50,393 million (US$13,433.13 million) with total bids amounting to SAR79,100 million (US$21,085.17 million).

These were 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 in 2020 amounted to SAR85,038 million (US$22,638.35 million), which is almost a 50% increase on the previous year.

Under the anticipated 2021 sovereign domestic Sukuk issuance regime, there will no longer be any standalone ad hoc auctions. All the domestic sovereign Sukuk offerings will be unified under the Government Saudi-riyal denominated Sukuk Programme.

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.

Moody’s Investors Services in October assigned (P)A1/Aaa.sa rating to The Government Saudi-riyal denominated Sukuk Programme for 2021. “This rating,” said Saudi Minister of Finance, Mohammed Al-Jadaan, “reflects the strength, flexibility and capability of the Kingdom’s economy in facing global economic challenges and confirm great confidence in the Saudi economy.”

According to Fahad Al-Saif, CEO of the NDMC, the highest investment grade (Aaa.sa) rating for the government domestic Sukuk programme, “reflects the depth of the local debt market by providing a risk-free yield curve, and confirms the high creditworthiness of the Sovereign local issuances with the growing appetite of investors and private sector to the Saudi local issuances, especially in light of the financial and economic conditions that the world is currently witnessing due to the Coronavirus (Covid-19) pandemic.”

Al-Saif explained that the credit rating of local issuances is a guiding reference for potential issuers from the public and private sectors in Saudi Arabia and contributes to enhancing transparency within the local debt markets. The national scale rating also contributes to achieving the objectives of the Financial Sector Development Programme in deepening the market and developing local debt markets and is expected to further attract foreign investors in the local debt capital market.

There is growing domestic and international demand for fixed income assets in the kingdom that are Sharia’s compliant.

Saudi Sovereign Domestic Sukuk Issuance Jan-December 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

23 December

Tranche 1 – No Allocation

——————

Tranche 2 –

No Allocation

 

27 July 2027

—————

26 July 2032

 

 

7 Years

————–

12 Years

 

1.73% pa/

——————-

2.89% pa/

 –

 

 

SAR11,721m

 

Total First Eleven Months 2020

 

SAR50,393m US$13,433.13m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SAR90,821m

US$24,276.17m

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

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