JEDDAH, 19 January 2005 — The Saudi Hollandi Bank on Saturday priced the first ever Lower Tier II bond by a Saudi Bank. It is also the first under the new Capital Markets Authorities Regulations.

The bond is a SR700 million issue through joint-lead managers ABN AMRO (which owns 40 percent of the stock of the bank) and the Saudi Hollandi Bank. The bank is rated Baa2 by Moody’s and BBB+ by Fitch.

The issue consists of floating rate notes with proceeds being used to strengthen Saudi Hollandi’s capital base in line with Basel II as well for continuing capital management. All notes have been placed on the basis of an exempt offering open only to Saudi Arabian investors and complying with the new Capital Market Law.

The new laws regulate the flotation of bonds, set out principles for the enrolment of bonds, and set out market etiquette very clearly. Head of CMA, Jemaz Al-Suheimy, recently said the three laws would protect investors and preserve market credibility but not be an unacceptable burden for investors, intermediaries and financial consultants. He said that the CMA was keen to expedite transfer to the new capital market system.

The new laws should encourage formation of more joint stock companies and develop a culture of fair and transparent stock market dealings.

The aim is to encourage more Saudis to participate in the financial market and help the market achieve high degrees of transparency and confidence.

The new law on enrolment of bonds demands frank and continuous statements from listed joint stock companies.

The flotation law explains the types of issues acceptable to the market and the terms and conditions to be fulfilled by companies and allows both public and private flotation of bonds.

The new laws were formulated in the light of current regulations governing international capital markets after consulting legal and financial experts inside and outside the Kingdom. Insider dealing has been specifically covered.

“The law criminalizes deals based on internal information and bans the issuance of incorrect information. It also sets out acceptable principles for the relation between investors and intermediaries.”

It also prohibits false stock exchange deals, manipulation of opening and closing prices and ordering bonds without intent to take them up. “It also prohibits officials, from leaking sensitive information that would affect prices of bonds if made public,” he said

The Hollandi issue offer seven-year floating rate notes, non callable for five years and priced at +85 bps above the Saudi Interbank Offering Rate.

They mature on Dec. 28, 2011, and are callable in 2009 and commission dates after that. All notes will be paid quarterly.

ABN AMRO acted as capital structuring adviser on the transaction which was heavily oversubscribed. It attracted a mix of institutional, corporate and private investors and private investors from Saudi Arabia.

Chris Wilmot, treasurer of the Saudi Hollandi Bank, was delighted with the transaction. “This clearly shows the bank as an innovator for debt capital markets in the kingdom,” he said.

“It marks the beginning of the bank’s efforts to develop the Saudi debt markets with the introduction of new issuers, backed by ABN AMRO’s well regarded debt markets, franchise and structuring expertise.”

Zafar Alam, global head of Emerging Markets at ABN AMRO, said that the strong investor demand for these bonds illustrated the market’s confidence in the future growth of the bank.

“Institutions across the Gulf states are looking to implement the Basel II accords,” he said, “and we expect further subordinated issues in later in the New Year.”