Saudi Arabia raises $9 bn in first global Islamic bond issue

Saudi raises $9 bn in first global Islamic bond issue. (AFP)
Updated 13 April 2017
0

Saudi Arabia raises $9 bn in first global Islamic bond issue

RIYADH: Saudi Arabia raised $9 billion in its first global Islamic bond issue, the government announced on Thursday, a move analysts say could ease pressure on foreign reserves.
The sale of Islamic bonds, known as sukuks, comes after the kingdom in October turned to the conventional global debt market for the first time, raising $17.5 billion in a bond issue.
Saudi Arabia has also sold domestic bonds and drawn on its accumulated reserves, all in an effort to reform the economy and address budget deficits caused by a collapse in oil revenues since 2014.
“The ministry of finance received significant interest for the first international issue of the sukuk program with an order book from investors in excess of $33 billion,” the official Saudi Press Agency said.
There will be two tranches of $4.5 billion, one maturing in 2022 and another in 2027, reflecting “the strong fundamentals of the Saudi economy,” it said.
Islamic financial instruments including sukuks are structured to comply with Islamic law, which does not allow the payment of interest.
Riyadh has forecast a budget deficit of $53 billion this year, after an even bigger shortfall last year prompted subsidy cuts and delays in major projects.
In a report this month, Saudi firm Jadwa Investment said the kingdom’s foreign reserves, including securities, bank deposits and gold, had fallen to a near six-year low.
Reserves dropped to $514 billion in February, down $10 billion from the previous month and the lowest level since August 2011, Jadwa said.
“Any new international sovereign bond, or indeed sukuk issuance, should alleviate the pressure on foreign exchange reserve withdrawals,” the researchers said.


French state-owned bank drops plan to aid trade with Iran

Updated 24 September 2018
0

French state-owned bank drops plan to aid trade with Iran

PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.
The United States is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.