Date: February 2023
Issuer: TMS Issuer
Obligor: Greensaif Pipelines Bidco
Size: $1.5 billion
Structure: Wakala-murabaha
Tenor: 7.5 years
Banks: BNP Paribas, HSBC, JPMorgan (global coordinators, active bookrunners); Citi, First Abu Dhabi Bank, MUFG, SMBC Nikko (active bookrunners)
Such is the growth and dynamism of Islamic finance that innovative transactions are thick on the ground, providing additional propulsion to an already rapidly developing market.
Last year, there were several market firsts and distinctive deals, but there was only one that pioneered new financing territory, opening-up huge potential to draw a fresh wave of shariah-aligned investment capital toward some of the world’s most ambitious projects.
The $1.5 billion sukuk for Greensaif Pipelines Bidco, which forms part of a bigger triple-tranche $4.5 billion project bond and sukuk financing, was a ground-breaking transaction, marking the first time a project finance sukuk has been issued on the international capital markets.
It was not the biggest sukuk issued last year, or the most high-profile. But it is important, not least because sukuk project financing could boost real-economy investment in sectors and parts of the world where it is needed most.
Such importance is unlikely to be lost on the banks that brought the deal, which include BNP Paribas, HSBC and JPMorgan as global coordinators and active bookrunners, along with Citi, First Abu Dhabi Bank, MUFG and SMBC Nikko.
It was not the biggest sukuk issued last year, or the most high-profile. But it is important
The sukuk inclusion was orchestrated by Greensaif, an investment vehicle 79% indirectly owned by BlackRock and affiliates, with the balance owned by the investment arm of Saudi Arabia’s General Organisation for Social Insurance.
The vehicle was set up to buy a lease on 49% of Saudi Aramco’s gas pipelines for 20 years, and to be paid by Aramco to use them. Greensaif wanted to raise funds to partially repay a $13.4 billion acquisition bridge facility.
A key reason for including the sukuk – in wakala-murabaha format – was to open up the financing to a wider universe of institutional investors.
While that objective was straightforward, the sukuk’s inclusion came with structuring challenges and additional requirements on top of the complex terms and conditions typically seen in structured project bonds (for example, no sharing of security between the conventional financings and sukuk under AAOIFI Standards).
After weeks of detailed discussion between various parties, which included the central bank of the UAE, the deal team found a way through the structuring challenges, successfully placing the three tranches in February last year.
As well as the $1.5 billion 2032 project sukuk being the first sold on the international markets, the $1.5 billion 2042 note was also the first dual-listed formosa project bond.
Combined with a $1.5 billion 2038 conventional bond, the entire transaction drew final orders of over $20 billion – resoundingly outstripping initial size expectations of $3 billion – marking the largest orderbook for a project bond from the Middle East and North Africa region.
