KSA selects banks for GACA sukuk issue
By: Ruchi Shroff
The General Authority for Civil Aviation (GACA) of Saudi Arabia has picked three banks to arrange the second tranche of its local Islamic bond programme, Reuters has reported. A sale could match the GACA's record-breaking $4 billion debut sukuk in 2012.
The GACA has chosen HSBC Holdings' Saudi Arabian unit and the investment banking arm of state-owned National Commercial Bank to manage the riyal-denominated transaction. Standard Chartered will also be involved in the transaction, having pitched jointly with NCB Capital, but will hold a more junior role than the other two banks.
Saudi Arabia is investing heavily in infrastructure projects and revamping many of its airports to cater for growing passenger traffic, including through a planned 27 billion riyal ($7.2 billion) development of Jeddah's King Abdulaziz Airport.
The sukuk is expected to draw significant demand from Saudi investors as it will be backed by a guarantee from the country's Ministry of Finance. Given that the kingdom doesn't issue sovereign debt, this is the closest that investors can get to holding government paper.
The last sukuk, a 15 billion riyals ten-year government-guaranteed deal priced in January 2012, was the country's largest ever local currency bond and attracted orders from investors worth 3.5-times the final amount.
"They are planning to raise the same amount and they could very easily do it," one banking source reportedly said.
The kingdom's finance minister said in December that bonds would be issued in 2013 to fundconstruction at airports in Jeddah and Riyadh.