Saudi bank's second sukuk sales raise 725m riyals

Riyadh: Saudi Hollandi Bank has raised 725 million Saudi riyals (Dh708 million) from the sale of its second Islamic bond, a source at Saudi Hollandi said.

"The sukuk was four times oversubscribed, which shows there is healthy appetite in the market," the banker said.

The 10-year bond was priced at 190 basis points above the six-month interbank lending rate Saibor, he said, adding that the Islamic bond has a call option in 2014.

The Tadawul-listed bank, which is 39.9 per cent owned by the Royal Bank of Scotland, had last year raised 775 million riyals sukuk in a private placement, priced at 200 basis points above Saibor.

Saudi Hollandi's sukuk, like that of Saudi Electricity Co's oversubscribed 7 billion riyals issue in late June, was mostly bought by institutional investors in the Kingdom. Banks and other large investors in Saudi Arabia have been parking their cash since the fall of Lehman Brothers, and have been piling into low-yielding accounts at the Saudi Arabian Monetary Agency and foreign banks.

Saudi Arabia, along with other states in the Arbian Gulf, has been encouraging companies to look at debt markets to raise capital as other forms of financing have dried up.

Debt issues have picked up this year after a slow start in the first quarter. Global issuance of Islamic bonds increased 58 per cent to $24.2 billion since the beginning of the year compared to the same period a year earlier, according to data compiled by the Zawya Sukuk Monitor.

But the market hasn't been able to match the action of 2007, when $34.2 billion in sukuk were issued, despite the rising profile of Islamic finance which has sidestepped much of the global economic downturn.

Surge in demand

• 190 basis points above Saibor pricing for sukuk
• $34.2b sukuks issued in 2007