HSBC and NCB Capital announce completion of SR15bn GACA sukuk

Updated 07 October 2013
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HSBC and NCB Capital announce completion of SR15bn GACA sukuk

HSBC and NCB Capital announced the completion of the largest ever government guaranteed sukuk in Saudi Arabia for the General Authority of Civil Aviation (GACA). Totaling SR15.211 billion ($4.056 billion), the sukuk achieved a profit rate of 3.21 percent p.a. (per annum).
HSBC and NCB Capital acted as joint lead managers and bookrunners of the sukuk. Additionally, HSBC acted as the sukuk coordinator, sole Shariah coordinator, and agent of sukuk holders and payment administration. Standard Chartered Saudi Arabia was co-lead manager for the issuance.
Walid Khoury, CEO of HSBC Saudi Arabia Ltd., said: “This is the second great achievement for GACA, and stands as a testament of the confidence local investors have in this high quality name. Not only did it raise SR15.211 billion for the authority, but it’s done so at an attractive profit rate of 3.21 percent p.a. with a diverse set of investors participating.”
Jawdat Al-Halabi, CEO of NCB Capital, said: “We are honored to have jointly led this strategic transaction in support of the government’s plans to expand the Kingdom’s infrastructure. The sukuk market, both globally and in the Kingdom has been gaining momentum in recent years and we see this trend continuing and reflected in the huge demand by investors for this issue.”
This deal was 1.9 times oversubscribed with strong demand from a wide range of investors, including banks, sovereign funds, pension agencies, insurance companies and corporates. This diversity of investors means that any subsequent issuance won’t be over reliant on any one sector and GACA could tap into a ready investor base. This sheer scale of the demand and the eventual pricing demonstrates the confidence buyers have in both the region and its government.
Fahad Alsaif, head of capital markets and corporate finance, HSBC Saudi Arabia, said: “Many sukuk of this size are issued in multiple tranches, with different prices and dates of maturity. However, this sukuk has been launched as one single issuance, and in doing so has become the largest single-tranche sukuk ever issued in Saudi Arabia.”
Hicham Hatoum, head of investment banking at NCB Capital, says: “The fact that the largest ever Saudi riyal issue attracted a demand of this magnitude is a testament to the lead managers’ joint drive to diversify the targeted investor base. We were pleased to attract insurance companies and corporate sector treasuries alongside traditional government and bank investors.”
Boutros Klink, CEO of Standard Chartered Capital, said: “The Saudi debt capital markets are fast growing and an issuance of this scale demonstrates the depth of the market. We look forward to becoming an active participant in developing the Kingdom’s debt capital markets and are thankful to the authority for giving the opportunity to contribute to the success of this transaction.”


Additionally, this issuance is also approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero percent risk weighting for capital adequacy calculation purpose. This means that investors can hold this sukuk as an investment, but also use it as an effective liquidity tool by using it to guarantee cash from the central bank.


China, EU to form group to modernize global trade rules

Updated 58 min 54 sec ago
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China, EU to form group to modernize global trade rules

  • China and the EU agreed to launch a group that will work to update global trade rules
  • Companies worry the US-Chinese dispute could chill global trade and economic growth if other governments respond by raising their own import barriers

BEIJING: China and the European Union agreed Monday to launch a group that will work to update global trade rules to address technology policy, subsidies and other emerging irritants and preserve support for international trade amid US threats of import controls.
Actions such as US President Donald Trump’s unilateral tariff hikes in a technology dispute with Beijing show World Trade Organization rules need to keep pace with changes in business, said an EU vice president, Jyrki Katainen.
Katainen said Europe was not siding with Beijing in its dispute with Trump but was taking action to protect the global system of regulating free trade. He said the EU wants other governments to join the WTO group.
Companies worry the US-Chinese dispute could chill global trade and economic growth if other governments respond by raising their own import barriers. Even before Trump took office, economists were warning countries were tightening import restrictions and taking steps to favor their companies over foreign rivals.
US officials complain the WTO, the Geneva-based arbiter of trade rules, requires an overhaul because it is bureaucratic, rigid and slow to adapt to changing business conditions.
Katainen said Europe wants to focus on issues including subsidies to industry, government pressure on foreign companies to hand over technology and the status of state-owned industry — all areas in which Beijing faces complaints by Trump as well as other trading partners.
“I don’t expect these negotiations to be easy,” Katainen said at a news conference. But if nothing is done, “the environment for multilateral trade will vanish.”
Trump has threatened to impose tariffs of 10 percent to 25 percent on up to $450 billion of Chinese goods. Beijing responded to Washington’s first round of hikes on $34 billion of imports by raising duties on US soybeans, whiskey and other products.
Other governments have similar complaints but Trump has been more direct about challenging Beijing and threatening to disrupt exports.
Beijing might agree to talks to deflect further sanctions but is unlikely to agree to changes that hamper its technology plans, said Mark Williams of Capital Economics.
“I very much doubt they would agree to anything that would have teeth and punish them,” said Williams. Policies companies object to are “integral to the growth model China is pursuing,” he said.
Beijing agreed to narrow its multibillion-dollar trade surplus with the United States by purchasing more American goods but scrapped that after Trump went ahead two weeks ago with a tariff hike on $34 billion of imports.
Beijing also has cut import duties on autos and some consumer goods and promised to remove limits on foreign ownership in its auto, insurance and finance industries.
But the Communist government has resisted any change to its plans that call for challenging US and European technology dominance by creating Chinese companies capable of competing in fields including clean energy, biotech and aerospace.
Chinese officials deny foreign companies are required to give up technology. But in many industries they are compelled to work through state-owned partners, which requires them to share know-how with potential competitors.
One in five companies that responded to a survey by the European Union Chamber of Commerce in China released last week said they felt compelled to hand over technology in exchange for market access.
Trump infuriated US allies — from the EU to Canada and Mexico — last month by imposing tariffs of 25 percent on imported steel and 10 percent on aluminum. He said imports threatened America’s national security — a justification countries use rarely because it can be easily abused.
Beijing has tried to recruit European allies in its dispute with Washington, promising visiting leaders including Germany’s Chancellor Angela Merkel in May to open industries wider to their companies.
On Monday, Premier Li Keqiang, China’s No. 2 leader, told visiting French Premier Edouard Philippe that Beijing would allow more imports of beef and other food from France. Li said French companies were welcome to invest.
“China takes a positive attitude to cooperation with the French side,” Li said.