JEDDAH, 15 July 2007 — Saudi Basic Industries Corporation (SABIC), one of the world’s top ten petrochemical manufacturers, launched its second sukuk on Wednesday. Shariah-compliant and with the approval of the Saudi Capital Market Authority (CMA), the Sukuk issuance will be available to investors in the GCC and Saudi Arabia. The sukuk will be issued in denominations of SR10,000 and will be subject to a minimum holding of SR50,000.
SABIC mandated HSBC Saudi Arabia Limited and Riyad Bank as lead managers and book runners for the sukuk issuance, which features a sukuk structure approved by SABB Amanah’s Shariah Supervisory Committee.
A spokesman for SABIC said that it was expected that the sukuk would contribute toward the development of the vibrant capital markets in the Kingdom and complement the equity markets so benefiting the wider economy of the Kingdom.
The sukuk offering is expected principally to attract institutional investors and targets banks and financial institutions, fund asset managers, pension and insurance companies and other institutional investors. Individuals are also eligible to purchase the sukuk through either of the two joint lead managers.
SABIC successfully launched its debut sukuk in July 2006. Then, the CMA gave approval to SABIC to launch a sukuk of SR3 billion ($800 million), the first in Saudi Arabia under the new Capital Market Law. HSBC Group was the lead manager and book runner for the pioneering issue. The 2006 SABIC sukuk was the first to be approved by a Shariah Committee of a Saudi bank that was, then as now, the SABB Amanah Shariah Supervisory Committee.
According to Asem AlBuolaya, a financial analyst based in Dhahran, sukuk are essentially assets-backed securities. Unlike conventional structures, sukuk are a form of commercial paper that provides an investor with ownership in an underlying asset. It is an asset-backed security, based on the balance sheet of the issuing company, that has a stable income and Shariah-compatible trust certificates.
The identification of suitable asset is the first and most important step in the process of issuing sukuk certificates.
AlBuolaya says that the sukuk market through the past five years has seen a rapid surge in issuance across Asia and the Middle East. The sukuk certificates for medium term investment totaled approximately $7 billion in 2004. The amount grew to reach around $20 billion by mid 2006.
Road shows started in Dubai on July 11, 2007 and were followed by road shows in Bahrain on July 12, Riyadh on July 14. Jeddah is targeted for on July 15.
