By David French and Shaheen Pasha
The Olayan Group, one of the largest conglomerates in Saudi Arabia, has concluded its maiden issue of an Islamic bond, or sukuk, two sources with knowledge of the matter told The Brief and Reuters on Tuesday. International law firms Baker & McKenzie and Allen & Overy advised on the deal.
It is one of a number of Saudi entities that have priced their first local currency sukuk this year, as interest in the country's debt market grows on the back of high investor liquidity and a desire to diversify funding sources away from bank loans.
The firm, which has interests in manufacturing and services and has a multibillion dollar portfolio of investments spread across major asset classes globally, priced the 650 million riyals ($173.3 million), five-year sukuk at 150 basis points over the Saudi interbank offered rate (SAIBOR), one of the sources said.
The privately-place transaction was around 2.5 times subscribed, and was sold to investors including banks, private funds and insurance companies, the source added.
HSBC's Saudi Arabian unit and Riyad Capital, the investment bank arm of Riyad Bank, arranged the sukuk. Baker & McKenzie was the legal adviser to the company on the deal, while Allen & Overy acted as the banks’ legal adviser, the second source told The Brief, a Thomson Reuters publication.
Olayan Group is one of the largest family-owned firms in the kingdom and owns a sizeable stake in Swiss bank Credit Suisse. It also manufactures and distributes products in the Gulf Arab region for multinationals including Colgate-Palmolive Co and Kimberly Clark Corp.
Of the initial local currency sukuks priced by Saudi entities this year, the largest was a 15-billion riyals ($4 billion) issue from the General Authority for Civil Aviation (GACA) in January. National Industrialization Co (Tasnee), a petrochemicals company, and dairy firm Almarai Co completed deals worth two billion riyals and one billion riyals in May and March respectively.
Shaheen Pasha is Middle East Regional Editor at The Brief. Follow us on Twitter: @ALB_TheBrief.
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