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Banque Saudi Fransi launches $750 million Sukuk
Launch spread at 185 bps over midswaps; Pricing tightened 15 bps from initial guidance; Sukuk to price Tuesday; first under new $2 billion programme
May 17, 2012 11:11 by Reuters
Banque Saudi Fransi, the lender part-owned by Credit Agricole, launched a $750 million five-year Islamic bond on Tuesday at the tighter end of price guidance, which indicated strong investor demand for the issue.
Saudi Fransi, the kingdom’s fifth largest bank by market capitalisation, launched the sukuk at a spread of 185 basis points over midswaps, arranging banks said, at the lower end of the range indicated earlier in the day. It attracted orders worth $4 billion.
Initial price guidance released on Monday was 200 basis points over midswaps.
The issue would be the Saudi bank’s first sukuk sale under a recently-established $2 billion programme.
Dollar-denominated bonds from Saudi Arabia, the world’s top oil exporter, come to market relatively infrequently, and attract substantial demand when they do. Saudi Electricity’s $1.75 billion sukuk earlier this year received orders in excess of $15 billion.
Despite a higher level of uncertainty in the euro zone this week, Banque Saudi Fransi would have benefited from a strong regional bid supporting the deal, allowing the borrower to set a deal size bigger than the standard benchmark of $500 million.
“We have seen regional buyers support deal momentum and pricing increasingly over the last six months,” said a Gulf-based debt capital market official. “Despite the troubles in the rest of the world, the region has its own micro-climate.”
Banque Saudi Fransi’s existing $650 million 4.5 percent conventional bond, maturing 2015 was bid at just over 103.97 on Tuesday, to yield about 2.8 percent, Thomson Reuters data showed, coming under some selling pressure ahead of the new issue.
It was trading at a zero-volatility spread (z-spread) of about 211 basis points. The z-spread is a pricing tool which calculates the number of basis points that need to be added to a zero-coupon yield curve to make the bond’s discounted cash flows equal the bond’s present value.
Citi, Deutsche Bank and Credit Agricole are bookrunners on the deal. Allocations and pricing are expected early afternoon, London time.
(Reporting by Mala Pancholia in Dubai and Isla Binnie in London, Writing by Rachna Uppal; Editing by David French)