Saudi Arabia Launches Triple-Tranche Sukuk Sale
In a move to address its budget deficit amidst lower oil revenue, Saudi Arabia has initiated the sale of triple-tranche benchmark-sized Islamic bonds, known as sukuk. The sukuk, with tenors of 3, 6, and 10 years, have garnered initial guidance placing them at 85 basis points over US Treasuries for the three-year portion, 100 bps over UST for the 6-year tranche, and 110 bps for the 10-year segment.
With benchmark-sized typically indicating a minimum of $500 million, pricing for the sukuk is anticipated to be revealed soon. The Kingdom’s budget deficit is projected to reach SR79 billion this year, attributed to reduced oil revenue from voluntary output cuts and increased spending to support non-oil growth in alignment with Vision 2030 economic transformation plan objectives.
Moody’s recent upgrade of Saudi Arabia’s local and foreign currency rating to Aa1 from Aa2 highlighted the government’s improved decision-making predictability impacting the private sector. Global coordinators and joint book-runners for the sukuk sale include BNP Paribas, Citi, and Goldman Sachs International, while passive joint lead managers and book-runners are Aljazira Capital, HSBC Bank, JPMorgan, and Standard Chartered.
The Kingdom’s last bond issuance in January amounted to $12 billion in dollar-denominated bonds. Saudi Arabia’s current sukuk sale reflects its commitment to managing economic challenges and advancing its financial stability.