Saudi Arabia closes $2.78bln July sukuk program

Saudi Arabia has been increasingly active in the sukuk markets

Islamic finance. Image use for illustrative purpose.

Islamic finance. Image use for illustrative purpose.

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RIYADH: Saudi Arabia’s National Debt Management Center (NDMC) on Tuesday closed the July 2021 issuance for the government’s Saudi riyal-denominated sukuk, valued at SR10.412 billion ($2.78 billion), as the Kingdom continued to embrace the capital debt market.

The sukuk, or Islamic bonds, were divided into two tranches. The first tranche, valued at SR6.462 billion, will mature in 2031, while the second, valued at SR3.95 billion, will mature four years later.

Saudi Arabia has been increasingly active in the sukuk markets recently. The NDMC three weeks ago closed the June 2021 issuance valued at SR8.265 billion.

ACWA Power, the utility developer backed by the Kingdom’s Public Investment Fund (PIF), last month announced it had raised SR2.8 billion from its first-ever sukuk issuance. The sukuk will have a seven-year tenor and was 1.8 times oversubscribed, the company said in a statement.

Paddy Padmanathan, president and CEO of ACWA Power, said at the time: “The success of the issuance is proof of the wider market’s faith in Saudi Arabia’s bond market and ACWA Power’s strong credit fundamentals, which have attracted a diverse pool of sophisticated investors.”

At the same time, Saudi Aramco recently raised another $6 billion in its first US dollar-denominated sukuk sale. The energy giant sold $1 billion in a three-year tranche, $2 billion in a five-year portion and $3 billion in 10-year paper. It was Aramco’s third bond issuance, following its debut $12 billion bond in 2019 and an $8 billion, five-part transaction in November last year.

Khalid Al-Bihlal, head of S&P Global Ratings KSA, told Arab News last month that Saudi Arabia’s debt capital market was expected to grow as the Kingdom implemented its Vision 2030 goals.

“Driving growth of the Kingdom’s capital markets will be an increase in bond issuance to help fund the SR12 trillion Vision 2030. We project a gradual rise in the use of Saudi Arabian riyal-denominated bond issuance as the local capital markets develop. The US dollar is currently the currency of choice for such bonds. A gradual deepening of the local capital markets would likely increase their transparency and could reinforce corporate governance practices in Saudi Arabia in coming years,” he said.

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