RIYADH, 1 August 2007 — “Smooth as silk.” That is how Rajiv Shukla, director, debt capital markets at HSBC Saudi Arabia, yesterday described the completion of the settlement process of the Saudi Electricity Company’s (SEC) SR5 billion debut sukuk, “Saudi Arabia’s largest-ever sukuk or bond issue.”
HSBC Saudi Arabia Ltd. acted as sole lead manager and sole bookrunner for the highly successful issue. HSBC also acted as sukukholders’ agent, while the SABB acted as co-manager and payments administrator and SABB Amanah as the Shariah coordinator for the sukuk.
“Despite its record-breaking size, the subscription and settlement of the proceeds progressed without a hitch,” Shukla said.
SEC was able to raise riyals from domestic investors at a very competitive rate, just 45 basis points over the benchmark, a figure that represents a substantial saving from the cost of SEC’s existing loans. The sukuk is due 2027, although investors can exercise their right to oblige SEC to purchase the sukuk after five years in July 2012.
During a 10-day roadshow across Riyadh, Jeddah and Alkhobar, SEC and HSBC were rapidly able to build a high-quality orderbook amounting to almost SR7 billion, nearly three times SEC’s minimum target, allowing SEC to issue at the SR5 billion ceiling established by the Capital Market Authority (CMA) for this issue. As well as very competitive pricing, the sukuk subscription was well diversified as over 26 percent was placed with pension, mutual and other funds, and over 24 percent with corporates and institutions (banks’ treasuries comprising the balance). Importantly, several new investors participated for the first time in an offering of this nature, further deepening the sukuk market in the Kingdom.
“This sukuk follows the debut sukuk issued by Saudi Basic Industries Corp. (SABIC) last year which was also managed by HSBC on a sole basis. “It firmly establishes the viability of the sukuk instrument in the Kingdom,” Hissam Kamal, director of Islamic Finance, said. “Together with the clutch of awards from Global Finance, this reinforces HSBC’s position not only as the leading investment bank in the Kingdom, but also as the world’s pioneering and leading sukuk house.”