IslamicFinance.de

Saudi Arabia is committed to the sukuk market and will issue Islamic bonds as soon as market conditions allow. Fahad al-Saif, president of Saudi Arabia’s debt management office (DMO) said Saudi Arabia had a ratio of 65% to 35% for local to international issuance, plus or minus 10%. He added that the DMO aimed to develop the local market but not to crowd out the banks. Saudi Arabia started issuing debt in the international markets in 2016 when it issued $39 billion in bonds, including a $9 billion sukuk. Domestically, the government has raised a total of over 70 billion riyals ($18.67 billion) through monthly local currency sukuk issues. The kingdom has recently agreed the refinancing, extension and upsizing of a $10 billion loan it had raised in 2016. The loan has now been increased to $16 billion. Furthermore, a new dollar bond sale is expected over the coming weeks.

Saudi Arabia has asked banks for proposals to refinance its $10 billion international syndicated loan. The refinancing of the loan, which was raised in 2016, will include a repricing of the facility and the extension of its maturity to 2023 from 2021. An Islamic finance tranche using a murabaha structure will be added to the loan. Fahad al-Saif, president of the debt management office, said the plans were a step towards Saudi Arabia's ambition of establishing a prominent position in international debt markets as part of its economic reforms. The country's $10 billion syndicated loan in early 2016 was followed later that year by a $17.5 billion debut bond issue, the largest bond ever sold by an emerging market issuer.

Saudi Arabia plans to issue an international sukuk in the first quarter of 2018. Fahad Al-Saif, head of the debt management office, said the government would issue domestic sukuk in November and December. Saudi Arabia issued its debut international sukuk earlier this year, raising $9 billion.

The success of Saudi Arabia’s first government-backed Islamic bond issue, and the dairy company Almarai’s planned sukuk, will set the stage for what will probably be one of the kingdom’s strongest years for Islamic bonds.
The Almarai bond plus the four as-yet-unannounced sukuk issues that HSBC is also preparing, would total “multiple billions” of Saudi riyals. Saudi Arabia’s government is encouraging the current expansion of the sukuk market.
According to Khalid Howladar, an analyst with Moody’s Investment in Dubai and Fahad al-Saif, the HSBC sukuk developer, by issuing government-backed sukuks, Saudi Arabia also is trying to expand the capacity of its capital markets.