The most innovative Islamic deal 2023
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The most innovative Islamic deal 2023

Al Rajhi Bank’s SAR10 billion ($2.7 billion) retail public offer tier-1 sukuk.

Al Rajhi Bank HQ. Photo: iStock

Al Rajhi Bank’s SR10 billion ($2.7 billion) riyal-denominated tier-1 sukuk deal in November 2022 pushed the envelope on what was effectively the IPO of a sukuk.

In the five weeks it took Al Rajhi to complete the deal – following a quick approval by the Saudi Capital Market Authority – the bank solicited strong demand from institutional accounts. The final deal achieved a roughly 300% coverage rate, with bids from more than 125,000 investors. The transaction priced at 5.5% fixed, 60 basis points better than initially envisioned.

The structure was a Shariah-compliant perpetual callable in five years by the issuer. Since the sukuk is treated as equity, it is not liable for zakat – the compulsory Islamic tax on wealth.

The initial issuance size was SR4 billion, but, as the extent of investor interest became apparent, this was upsized to SR10 billion.

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