An issue would be the Saudi bank's first sukuk under a
recently-established $2 billion program.
Initial guidance for the sukuk was at 200 basis points
over midswaps. Benchmark is usually understood to be at least $500
million.
Market sources expect healthy demand for the deal,
propped up by a strong regional bid, despite the euro zone uncertainty which is
currently weighing on global markets.
"(Pricing) is better than rumored last week but
still relatively tight versus peers," said one regional trader, adding
earlier market chatter had indicated guidance in late 100s over midswaps area.
"We still anticipate a decent-sized book and expect pricing to tighten
further before launch."
Dollar-denominated bonds from Saudi Arabia, the world's
top oil exporter, come to market relatively infrequently, and attract
substantial demand when they do. Saudi Electricity's $1.75 billion sukuk
earlier this year received orders in excess of $15 billion.
"They (Banque Saudi Fransi) should have big books
since there is scarcity of Saudi paper," said another regional
trader.
Banque Saudi Fransi's existing $650 million 4.5 percent
conventional bond, maturing 2015 was bid at just over 104 on Monday, to yield
about 2.79 percent, Thomson Reuters data showed.
It was trading at a zero-volatility spread (z-spread) of
about 212 basis points. The z-spread is a pricing tool which calculates the
number of basis points that need to be added to a zero-coupon yield curve to
make the bond's discounted cash flows equal the bond's present value.
Roadshows in Saudi Arabia, the United Arab Emirates,
Singapore, Kuala Lumpur and in London, ended on May 11.
Citigroup, Credit Agricole and Deutsche Bank are
bookrunners on the deal.
