RIYADH: Saudi Arabia successfully issued $5 billion in triple-tranche Islamic bonds on May 28, attracting strong investor interest, Reuters reported, citing fixed-income news service IFR.
The sukuk, with tenors of three, six, and 10 years, were initially guided at approximately 85 basis points over US Treasuries for the three-year tranche, 100 bps for the six-year tranche, and 110 bps for the 10-year tranche.
The final pricing of the sukuk was tighter than the initial guidance, reflecting robust demand. The three-year tranche was priced at 60 basis points over US Treasuries, the six-year tranche at 75 basis points, and the 10-year tranche at 85 basis points. The sale garnered nearly $20 billion in orders prior to issuance.
Benchmark-sized offerings typically indicate at least $500 million per tranche. The final deal included $1.25 billion for the three-year sukuk, $1.5 billion for the six-year tranche, and $2.25 billion for the 10-year tranche.
This issuance comes as Saudi Arabia faces a projected budget deficit of SR79 billion ($21.06 billion) for the year. This deficit is driven by lower oil revenues due to the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, implementing voluntary output cuts. Additionally, increased spending is aimed at boosting non-oil growth to meet the goals of Vision 2030.
The Kingdom is anticipated to require SR138 billion in financing this year, Reuters reported.
The previous bond issuance in January saw Saudi Arabia raise $12 billion through dollar-denominated bonds.
On May 24, Moody’s upgraded Saudi Arabia’s local and foreign currency rating to Aa1 from Aa2, citing increased predictability in government decision-making affecting the private sector.
BNP Paribas, Citi, and Goldman Sachs International acted as global coordinators and joint book-runners for the sukuk issuance.
Aljazira Capital, HSBC Bank, JPMorgan, and Standard Chartered served as passive joint lead managers and book-runners.
This strategic move helps the Kingdom manage its fiscal deficit and supports the economic transformation agenda spearheaded by Crown Prince Mohammed bin Salman.
According to the news agency, the $5 billion sukuk issue underscores Saudi Arabia’s ongoing efforts to balance its budget and invest in long-term economic diversification initiatives despite fluctuating oil revenues.
