One transaction alone cemented Al Rajhi Bank’s claim to be the best sukuk house this year. On March 29, 2023, the world’s biggest Islamic bank by assets and market capitalization closed its first US dollar sustainable sukuk.
The bank spent the months before priming a jittery market for the inaugural $1 billion five-year deal. The first issuance in the international dollar capital markets seemed an obvious progression after two highly successful local issues in 2022.
That Al Rajhi closed the deal amid the global disruption that gripped the banking market in March cemented its position as the premier global Islamic financial institution. Even more impressive was how the team led by Al Rajhi Capital chief executive Waleed AlRashed AlHumaid harnessed the bank’s extensive investor network to pull demand from regional and international accounts.
The order book topped $3.75 billion, signalling that there is strong global demand for these products and that Al Rajhi is well placed to harness it.
Al Rajhi managed to tighten pricing from an initially targeted spread over US Treasuries of 150 basis points to 110bp. It marked the biggest price tightening for any financial institution in the Gulf Cooperation Council region in the last three years.
The proceeds are earmarked to support the bank’s green and social initiatives. Al Rajhi has long been a sustainability pioneer in the kingdom, an early adopter of the net-zero targets at the heart of the Saudi government’s Vision 2030 scheme.
Al Rajhi will play an important role in financing Riyadh’s ambitious efforts to diversify the economy away from oil and improve health, infrastructure, education and recreation facilities.
Over the past year, the bank brought a number of innovative sukuk deals to completion. It helped the ministry of finance to complete an early purchase of its outstanding riyal-denominated sukuk maturing in 2022, 2023 and 2026.
Al Rajhi will play an important role in financing Riyadh’s ambitious efforts to diversify the economy away from oil
This was a complicated four-tranche issue with tenors across five, seven, 10 and 15 years in accordance with the National Debt Management Centre’s mandate. Despite challenging conditions, Al Rajhi managed to tighten pricing from 5bp to 10bp above Saudi swap benchmarks to below 5bp.
The bank was instrumental in another sukuk deal involving Arada, a UAE real estate company, in June 2022. Arada issued a $350 million sukuk at 8.125%, maturing in 2027, the proceeds of which went to refinance existing debt. The five-year issue met with strong demand both regionally and globally.
It was the first big corporate deal from the Sharjah region of the UAE in the last five years. It also was the first sukuk issuance by a real estate company from the Middle East and north Africa region last year.
