Saudi Arabia returned to the international markets for the third time this year, through its first sukuk of 2025, while Arab National Bank continued the trend of financials from the kingdom to issue since primary reopened.

Ahead of these latest deals, Saudi Arabian issuers had already raised US$50.9bn this year, according to LSEG data, compared with US$43.1bn at the same stage of 2024. The jurisdiction's importance to CEEMEA is such that it accounts for just under 25% of all issuance from the region this year, as of the end of August.

Saudi Arabia (Aa3/A+; Moody's/Fitch) raised US$5.5bn through a dual-tranche deal, which comprised US$2.25bn 4.25% September 2030s and US$3.25bn 4.875% September 2035s.

This was the kingdom's first fully AAOIFI-compliant sukuk, which meant it could tap into demand from UAE banks that are bound by the Higher Shariah Authority.

The deal was initially targeting US$4bn–$5bn but was upsized after combined books peaked at more than US$17.5bn, according to a lead banker.

Pricing opened in the areas of 95bp and 105bp over Treasuries, respectively, but the leads were able to tighten to plus 65bp and 75bp.

The lead banker said that meant the tranches came in line with fair value.

A second lead banker said the sizing of the tranches was in line with a marginal skew in demand. "The headline book was bigger for the 10-year tranche," he said.

Faisal Ali, senior portfolio manager at Azimut, said the sukuk were issued "slightly cheap to the KSA curve while also offering some pickup over investment-grade sovereigns from Asia."

He said the kingdom "had to offer some concession as the issuance amount was higher than what the market was estimating and due to elevated issuance from Saudi Arabia this year."

He said the big order book was "a positive sign for the Saudi government as it will have to rely on foreign as well as domestic debt markets to finance a rising budget deficit".

Citigroup, HSBC, JP Morgan and Standard Chartered were the global coordinators and bookrunners. ICBC and Mizuho were active lead managers.

Arab National Bank became the fourth bank from the kingdom to issue in just over a week, following Alinma Bank, Banque Saudi Fransi and Saudi Awwal Bank.

ANB (A1/A–/A–) also followed the three other banks in issuing in subordinated format, though it issued an AT1 whereas the other three were Tier 2 transactions. 

There had been signs of some resistance from investors on Alinma and Awwal deals, but ANB managed to tighten pricing by nearly 50bp through the execution process.

Leads began marketing the US$750m perpetual non-call 5.5-year sustainable AT1 at the 6.875% area.

The transaction generated a peak order book over US$2.5bn (excluding JLM orders), supported by demand from MENA investors.

That allowed the leads to tighten pricing by 47.5bp to 6.4% from IPTs.

"AT1s continue to have a good private banking bid," said a lead banker. "If you're looking for yield in the banking sector then AT1s are still demanding good interest."

Ali said the issue was priced "close to our fair value target, which was derived from looking at the yields on recently issued Saudi AT1 bank sukuk."

He said there were some concerns it might trade poorly given the spate of Saudi bank sub-debt issued over the last few weeks. "However the deal was well absorbed and holding up in the secondary," he said.

The transaction marks ANB’s return to the international debt capital markets since their debut issuance, a Tier 2, in 2020.

ANB Capital Company, Arqaam Capital, Bank of America, Citigroup, Credit Agricole CIB, Deutsche Bank, HSBC, Kamco Investment Company, SMBC and Standard Chartered were the bookrunners.

 Source: IFR