The most innovative Islamic deal 2023
Al Rajhi Bank’s SAR10 billion ($2.7 billion) retail public offer tier-1 sukuk.
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. Listed on Tadawul, it offered broad access to retail as well as institutional investors.