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GACA all set to Sell Saudi's First Sovereign and Largest Sukuk Ever

Published: 15/01/2012 08:34:00 PM GMT
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Saudi Arabia has confirmed that their Civil Aviation Authority will sell the Kingdom's first sovereign Sukuk ever. It is guaranteed by the Ministry of Finance as the huge amount of SAR 15 billion Sukuk will give Saudi Arabia a bigger Sukuk Market to look after and rule.

The General Authority for Civil Aviation of Saudi Arabia (GACA) is about to sell their first ever Sukuk. After completing many milestones in the global financial market this would be the first ever sovereign Sukuk issued out of the Saudi Kingdom. It is also told that the Saudi government would also seek more corporate financial moves to plan similar to this one in the year 2012. Saudi government has been observed as not a major financer when compared to its peer gulf nations for Sukuk but this is a much bolder step that it has taken.

The GACA Sukuk is guaranteed by the Ministry of Finance of Saudi Arabia and it will be sold in domestic market and it would also be restricted to sophisticated investors resident in the Kingdom of Saudi Arabia. HSBC is chosen as the sole lead manager and book-runner for all the transaction approved by the shariah board of HSBC Saudi Arabia. The resulting amount in profit can be used on expansion of Jeddah airport. Saudi Riyal denominated Sukuk will be sold in denominations of SAR 1,000,000 and first settlement date is announced to be 18th January 2012. GACA could also raise the price as much as SAR 15 billion or USD 4 billion this week which would make Sukuk the biggest ever in the history of the this wealthy region. The largest Saudi Sukuk to date is SABIC's second Sukuk stands at SAR 8 billion issued which was issued back in July 2007.

It is observed that USD 2.76 billion were sold in Sukuk in the Saudi Kingdom in 2011 out of just 5 issuances, that if be compared to USD 3 billion in 2010 from 4 issuances it seems that the potential for the biggest investment seems fruitful as more people have started to earn believe in the system of Sukuk. Over the years Saudi Arabia has managed to earn a stable image in Sukuk Market through investments including petrochemical's SABIC, real estate's Dar Al Arkan and construction's Saudi Binladin, Utilities' Saudi Electricity Company (SEC) and Financial Services' Saudi Hollandi Bank and Bank Al Jazeera among others. Still what secures this investment is that the government has offered a guarantee to this system which has happened for the first time.

Saudi Arabia's first moves for enhancing investments was last year's first ever project Sukuk by SATORP and than the investments didn’t stop another successful short-term Sukuk model manifested in Saudi Bin Ladin 9 months and 1 year Sukuks also brought decent digits of profit to the state. The latter investments are the shortest termed. This year's GACA Sukuk is expected to add diversity, richness and depth of the Saudi Sukuk experience for investments.

The Kingdom is by far the largest economy in the MENA region benefiting from high oil returns. The investments it has made since a while now are the most revenue generating investments it is expected to continue the economic growth.