HSBC has completed the first government-guaranteed sukuk in Saudi Arabia for Saudi Arabia’s General Authority of Civil Aviation (GACA). Raising US$4bn for GACA, the sukuk achieved a profit rate of 2.5%. The deal was 3.5 times over-subscribed with strong demand from a wide range of banks, sovereign funds, pension agencies, insurance companies, corporates.
HSBC acted in sole capacity as lead manager and bookrunner, sukuk arranger, Shariah co-ordinator, sukuk holders’ agent, and payment administrator.
Walid Khoury, chief executive officer (CEO) of HSBC Saudi Arabia said: “This is a great achievement for GACA, and stands as a testament to the confidence local investors have in this high quality name. Not only did it raise US$4bn, but it has done so at a profit rate of just 2.5%. This is only around half a percent more than US treasury notes and less than half the rate some European countries have to pay for their funds.”
This issuance is also the first sukuk approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero percent 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.
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