Pricing of Saudi Electricity's Islamic bond rises sharply

The pricing of a SR5 billion ($1.33bn, Dh4.8bn) Islamic bond, or sukuk, issued by Saudi Electricity was 160 basis points over the Saudi Interbank Lending Rate, the company's top executive said yesterday.

Ali Saleh Al Barrak said the five-year sukuk was oversubscribed "at least once" but did not say how much the company would end up taking. Bankers said the firm would take SR7bn.

Barrak declined to comment on this figure.

"It has not been decided yet," he said.

The pricing of the sukuk marks a sharp rise compared to Electricity's maiden issue of SR5bn which was priced at 45 bps above the Saudi Interbank Rate. "The conditions prevailing in the global credit markets are the cause for this rise but it is still a good pricing," he said.

Companies in the Arab world's largest economy are seeking other ways to finance projects as the global crisis prompts banks to tighten lending.

Saudi Arabia, which has the largest bourse by market value in the Middle East, started an electronic market for bond trading this month as part of its efforts to broaden sources of financing.

Saudi companies are taking the lead in reviving the sukuk market after sales plunged in 2008 as tumbling crude oil prices sapped demand from the Middle East.

Sukuk worth $13.9bn were sold last year, following a record $31bn in 2007, Bloomberg data show. Sales have reached $6.6bn so far this year.

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