Saudi Arabia hires JPMorgan, Standard Chartered for $2.5bn sukuk

• The sale of the new sukuk notes, due in 2029, will be completed on Tuesday. The notes offer an initial profit rate equivalent to between 145 and 150 basis points over mid-swaps.
• Sukuk from the Gulf region are oversubscribed almost by default because the supply of sharia law-compliant assets has traditionally been below Islamic investors' demand.
• JPMorgan and Standard Chartered are coordinating the deal with Aljazira Capital working as joint lead bank.

DUBAI: Saudi Arabia has hired banks including JPMorgan and Standard Chartered to manage a $2.5 billion issuance of sukuk, or Islamic bonds, the kingdom's first international debt sale since an assault on its oil facilities last month.

The strikes, that initially halved Saudi crude production, led to a rating downgrade by Fitch, which cited increased geopolitical risks and the possibility of further attacks.

The sale of the new sukuk notes, due in 2029, will be completed on Tuesday. The notes offer an initial profit rate equivalent to between 145 and 150 basis points over mid-swaps, a document issued by one of the banks leading the deal showed.

Saudi Arabia has borrowed extensively over the past few years to offset the impact of lower oil prices on state revenue.

This year it raised 3 billion euros ($3.3 billion) in its first bond sale in that currency and $7.5 billion in conventional bonds in January.

The new sukuk transaction would complete Riyadh's external funding requirements this year, according to the document.

Fund managers said the initial marketing level put the notes at a premium of around 20 basis points over the existing curve.

The debt sale looked "cheap," said Zeina Rizk, fixed income director at Dubai-based Arqaam Capital.

Sukuk from the Gulf region are oversubscribed almost by default because the supply of sharia law-compliant assets has traditionally been below Islamic investors' demand.

Rizk added that the recent Fitch downgrade would not have any impact on investors' appetite for the notes.

JPMorgan and Standard Chartered are coordinating the deal with Aljazira Capital working as joint lead bank.

Separately, the government said on Tuesday it had issued 7.265 billion riyals ($1.94 billion) in domestic sukuk.