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Saudi firms may tap short-term sukuk

RIYADH: The successful sale on Saturday of a nine-month corporate sukuk will encourage similar issues in Saudi Arabia where access to longer-term financing is tight, HSBC said yesterday.

HSBC's Saudi affiliate advised and managed the 700 million riyal ($187m) sukuk by private construction company Saudi Binladin Group (SBG) - the kingdom's first sukuk issue with a maturity of less than three years.

SBG's sukuk was issued on a zero coupon basis and was oversubscribed 2.5-times, HSBC said.

The proposed return was based on a discount to the price at maturity.

The size of the discount was not revealed but Asad Saeed Khan, a senior fixed income and multi-assets portfolio manager at SAIB-BNP Paribas Asset Management, which bought into the issue, said it was three per cent.

"It's attractive given its nine-month maturity and in view of the relative opportunities available in financial markets," he said.

Interest for such issues is palpable from both issuers and investors, HSBC Saudi's Head of Global Capital Financing Sunil George, and Muhammad Farhan, Head of Islamic Finance, said.

"We expect to see more short-term sukuk issuances. The available short-term liquidity is significant and the investor demand for short tenor, credit worthy investments has been clearly demonstrated," they said.

After years of rapid credit growth, most Saudi banks saw their profitability hit over the past four quarters by both hefty provisions to counter exposure to troubled Saudi firms and a slowdown in lending.



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