The government has launched its debut sovereign Sukuk via the sale of the General Authority of Civil Aviation’s (GACA) 10-year Sukuk. The offering comes amid fierce optimism in the Islamic bond market and follows the sale of the world’s largest Sukuk offering by Malaysia’s Projek Lebuhraya Usahasama (PLUS) on the 12thJanuary.
GACA’s Sukuk, guaranteed by Saudi Arabia’s ministry of finance, was launched on the 15thJanuary and will be sold in denominations of SAR1 million (US$266,667); as the authority aims to raise SAR15 billion (US$4 billion). In addition to representing the kingdom’s first ever sovereign Sukuk, the issuance is also set to make up the largest issuance from Saudi to-date.
The papers’ first settlement date is expected on the 18thJanuary, with the transaction likely to be priced between 2.75-3%.
The landmark sale comes smack in the middle of a big month for Sukuk sales, getting 2012 off to a busy start and leaving market players optimistic on the year going forward. Apart from PLUS’ RM30.6 billion (US$9.67 billion) issuance in the second week of January; Emirates Islamic Bank and First Gulf Bank each sold benchmark-sized papers, while Tamweel sold a US$300 million offering.
According to a report from Kuwait Finance House Research, global Sukuk sales crossed US$85 billion last year, up by more than 90% in 2010; in a market driven by US$59 billion-worth of sovereign issuances.
Meanwhile, the GACA Sukuk is seen as significant to the growth of Saudi’s Sukuk market; setting a benchmark for more sovereign and corporate Islamic bond issuances from the kingdom this year. Data from Dealogic shows that in the past 12 months, Saudi Sukuk issuances amounted to just US$1.5 billion, with Saudi riyal-denominated Sukuk totaling US$700 million in the same period.