HSBC, NCB Capital, sucessfully deliver general authority of civil aviation’s sukuk

Press release
Published October 7th, 2013 - 06:56 GMT

HSBC and NCB Capital announced the completion of the largest ever government guaranteed Sukuk in Saudi Arabia for the General Authority of Civil Aviation ("GACA"). Totaling a size of SAR 15.211 billion (US$4.056 billion), the Sukuk achieved a profit rate of 3.21% p.a.

HSBC and NCB Capital acted as Joint Lead Managers and Bookrunners of the Sukuk. Additionally, HSBC acted as the Sukuk Coordinator, Sole Shari'ah Coordinator, Sukuk Holders' Agent, and Payment Administration Agent.  Standard Chartered Saudi Arabia was Co-Lead Manager for the Issuance.

Walid Khoury, CEO of HSBC Saudi Arabia Limited said: “This is the second great achievement for GACA, and stands as a testament of the confidence local investors have in this high quality name. Not only did it raise SAR 15.211bn for the Authority, but it’s done so at an attractive profit rate of 3.21% p.a. with a diverse set of investors participating"

Jawdat Al Halabi, CEO of NCB Capital, said, “We are honoured to have jointly led this strategic transaction in support of the government’s plans to expand the Kingdom’s infrastructure.  The sukuk market, both globally and in KSA has been gaining momentum in recent years and we see this trend continuing and reflected in the huge demand by investors for this issue”.

This deal was 1.9 times oversubscribed with strong demand from a wide range of investors including banks, sovereign funds, pension agencies, insurance companies and corporates. This diversity of investors means that any subsequent issuance won’t be over reliant on any one sector and GACA could tap into a ready investor base. This sheer scale of the demand and the eventual pricing demonstrates the confidence buyers have in both the region and its government.

Fahad Alsaif, Head of Capital Markets & Corporate Finance, HSBC Saudi Arabia, added: “Many Sukuk of this size are issued in multiple tranches, with different prices and dates of maturity. However, this Sukuk has been launched as one single issuance, and in doing so has become the largest single-tranche Sukuk ever issued in Saudi Arabia.”

Hicham Hatoum, Head of Investment Banking at NCB Capital, mentions, “The fact that the largest ever  SAR issue attracted a demand of this magnitude is a testament to the Lead Managers’ joint drive to diversify the targeted investor base.  We were pleased to attract insurance companies and corporate sector treasuries alongside traditional government and bank investors.”

Dr. Boutros Klink, CEO of Standard Chartered Capital, said, “The Saudi debt capital markets are fast growing and an issuance of this scale demonstrates the depth of the market. We look forward to becoming an active participant in developing the Kingdom’s debt capital markets and are thankful to the Authority for giving the opportunity to contribute to the success of this transaction.”

Additionally, this issuance is also approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero% risk weighting for capital adequacy calculation purpose. This means that investors can hold this Sukuk as an investment, but also use it as an effective liquidity tool by using it to guarantee cash from the central bank.

Background Information

HSBC

HSBC is one of the largest banking and financial services organisations in the world, with operations in 66 countries and territories. We aim to be where the growth is, enabling businesses to thrive and economies to prosper, and, ultimately, helping people to fulfil their hopes and realise their ambitions.

 

NCB Capital Company

NCB Capital was founded in 2007 as the investment banking and asset management arm of the National Commercial Bank (over 90% ownership), providing clients with premier solutions of integrated investment services. Today, NCB Capital is the largest Asset Manager in the Kingdom of Saudi Arabia and the largest Sharia compliant Asset Manager globally with over SAR140 billion of assets under management.

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