S. Arabia raises $5b in sukuk

Saudi Arabia has successfully raised $5 billion through the issuance of dollar-denominated sukuk, to finance initiatives under Crown Prince Mohammed bin Salman’s economic diversification plan, Bloomberg reported.

The bonds, with maturities ranging from three to 10 years, were sold at yields of 60 basis points above comparable US Treasuries for the shortest term and 85 basis points for the longest term, marking a decrease from initial estimations.

This move comes as Saudi Arabia seeks alternative funding sources to cover an anticipated fiscal deficit of around $21 billion this year, with total funding activities projected to reach approximately $37 billion. Funds raised will support the acceleration of projects aligned with the Vision 2030 agenda.

This offering follows a $12 billion sovereign debt sale in January, adding to Saudi Arabia’s record international bond issuance, notably in 2017 when it reached $21.5 billion.

Acting as bookrunners and global coordinators for the sale were Citigroup Inc., Goldman Sachs Group Inc., and BNP Paribas SA. Moody’s Ratings has assigned Saudi Arabia an A1 rating, reflecting the fifth-highest investment grade, with a positive outlook.

Despite geopolitical tensions in the wider Middle East, demand for Gulf Co-operation Council sovereign bonds remains robust, evidenced by recent deals involving Abu Dhabi and Qatar, as noted by Apostolos Bantis, managing director of fixed income advisory at Union Bancaire Privee Ubp SA.

Bantis emphasised that investor sentiment for high-quality bonds in the Gulf region remains strong, with the Kingdom’s credit profile expected to stay stable, supported by sustained high oil prices, despite increasing debt levels and minor fiscal deficits.