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GIB Issues First Saudi-Denominated Bond

Bahrain’s Gulf International Bank (GIB) last week issued its first Saudi riyal denominated bond, offering it to institutional investors in the Kingdom through private placement. The bond is expected to improve the maturity profile of GIB liabilities, thus lessening reliance on short term and increasing long term liabilities of the bank. Book building started on 4 November aiming to determine pricing, size, and maturity of the bond, and was expected to close by 8 November. The bond is expected to be around SR1.5-2bn ($0.4-0.53bn) although the amount is not fixed depending on how the book-building process will close. GIB set the price guidance at 130-140 bps over the three-month Saudi interbank offered rate (Sibor). MEES learns that the bond was oversubscribed by the first day, far exceeding the bank’s initial expectations.

According to GIB, a foreseen change in the rules managing liquidity in the banking sector, including the new Basel requirements expected by year end, is running behind schedule. Despite the growing issuance of Sukuk (a Shari'a compliant investment vehicle similar to a bond) in the MENA region, GIB decided that demand would be higher if it issued a conventional debt instrument. However, GIB officials have not ruled out the possibility of using Islamic instruments in future, MEES further learns. The Saudi Arabian Monetary Agency (SAMA) and the Saudi Public Investment Fund are GIB’s primary shareholders – followed by the other Gulf Cooperation Council (GCC) states in a minority shareholding – thus justifying, along with GIB’s ongoing business in the Kingdom, the decision to choose the Saudi market for the paper. GIB Financial Services and HSBC are the lead managers and book runners on the bond.

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