SAUDI Hollandi Bank (SHB), the oldest banking franchise in Saudi Arabia, has completed a SR1.4 billion ($373.3 million) Islamic bond issue, the bank said in a statement Monday.
The subordinated sukuk, which will boost the bank’s Tier two capital ratio, has a seven-year maturity but can be redeemed by the issuer after the end of the fifth year, the statement said.
The sukuk priced at 1.15 percent over the six-month Saudi interbank offered rate, it added.
Shareholders approved the issue of the sukuk in early October.
The issuance was marketed to Saudi investors, including government funds, banks, insurance companies, corporates and sophisticated investors. This marks Saudi Hollandi’s 4th and largest SR-denominated debt capital market issuance, highlighting its support to the development of the capital markets and its strategy to diversify its capital and funding sources.
SHB was able to achieve competitive terms for its issuance, with final pricing settling at the lower end of guidance.
SHB’s management has earmarked the Sukuk funds for further developing its Islamic business, prudently managing its assets-liabilities mix and maintaining a sufficient capital buffer.
HSBC Saudi Arabia Limited and Saudi Hollandi Capital acted as the Joint Lead Managers and Bookrunners on this landmark transaction.
Engr. Mubarak bin Abdallah Al-Khafra, Chairman of the Board of Directors at Saudi Hollandi Bank, said “the recent issuance underscores the fundamental
strength of the bank to be able to access the sukuk market at regular intervals. It also highlights the continued confidence of investors in the oldest banking franchise in Saudi Arabia. We would like to take this opportunity to thank the investor community for their participation in the issuance and contribution to the development of the sukuk financing market in the Kingdom”
Walid Khoury, CEO of HSBC Saudi Arabia and Khalid Nasser Al-Muammar, CEO of Saudi Hollandi Capital, in a joint statement, added “we congratulate the Saudi Hollandi Bank on a very successful and well-timed subordinated sukuk issuance which was only the second Tier 2 Capital issuance in Saudi Arabia under the newly enacted BCBS Basel III transitional guidelines. This transaction further highlights the confidence of issuers in debt capital markets as an avenue of raising funds at competitive terms and tapping into diverse liquidity pools available to them as a result. This issuance also proves that the Saudi capital markets consists of a vibrant investor community with a sophisticated approach to investing in fixed income products.” – SG