Saudi Arabia markets debut dollar sukuk with wide guidance

DUBAI (Reuters): Saudi Arabia has set initial price guidance for its planned U.S. dollar-denominated debut sukuk about 20 basis points wider than conventional counterparts issued last year, a document issued by one of the lead banks showed on Tuesday.

Guidance for a five-year tranche is set in the 115 basis points over mid-swaps area and for the 10-year tranche is set in the 155 basis points over mid-swaps area.

The planned Islamic bonds are set to be the largest ever sukuk. Price guidance tends to be wide to attract investors when a bond is marketed, and to tighten as demand for the paper piles up.

The consensus among investors is that final pricing will be flat or only a few basis points wider than Saudi Arabia’s existing curve . However, the final size of the order books could keep the price premium in the 10 to 15 basis points area should demand exceed expectations and should Saudi decide to go for a jumbo deal of around $10 billion, investors told Reuters on Monday.

The 144 A, Regulation S, senior unsecured sukuk is expected to price on Wednesday, the document showed.

BNP Paribas, Citi, Deutsche Bank, HSBC, J.P. Morgan, and NCB Capital are the joint lead managers and joint bookrunners.

Saudi Arabia is rated A1 by Moody’s and A+ by Fitch.