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Saudi Electricity has kicked off a roadshow for a potential FCY sukuk issuance,it said in a Tadawul filing yesterday. The sale is part of a USD-denominated green and / or conventional sukuk program kicked off in March of 2023 and is open to qualified international and local investors.
Background: The aims to raise funds to both finance capex spending and, possibly, green projects, the company’s website says. The program has raised USD 2 bn so far.
The details: The state-owned utility company will be marketing the unsecured senior USD-denominated issuance to fixed-interest investors. The roadshow will allow it to set a final price and size of the issuance once bankers get a handle on demand.
There’s no information yet on the timeline for the issuance, which like the previous two would be listed on the London Stock Exchange.
Refinancing its FYC sukuk program: The talked-up issuance would follow the company’s recent redemption of its Euronext Dublin-listed USD 800 mn last week.
The benchmark: The company’s first sukuk issuance under the program saw it raise USD 800 mn by selling 10-year sukuk with a 4.6% yield; and USD 1.2 bn via 30-year sukuk with a 5.7% yield in April 2023. Both issuances were listed on the LSE.
Uh, Enterprise? What’s an unsecured senior sukuk? It’s a shariah-compliant bond with no specific collateral backing, but holds a senior claim on the issuer’s assets and cashflow in case of default or liquidation. In other words: In the (really unlikely) event that Saudi Electricity were to default, you’d have a better chance than non-senior bondholders and equity shareholders when you line up to see what you can salvage from the situation.
Going to market through an SPV: The company plans to take the issuance to market through what’s called a “special purpose vehicle” or SPV. An SPV is a kind of safety net for bondholders. Issuers usually create SPVs with segregated assets and cashflow to provide a measure of transparency and clarity to bondholders about what their claims would be against in case of default or liquidation. And since the SPV is a separate legal entity from the issuer, its assets and cashflow are not exposed to claims by creditors other than the bondholders.
ADVISORS- The company has appointed Standard Chartered Bank, HSBC Bank, SMBC Nikko Capital Markets, MUFG EMEA, Mizuho International, JP Morgan Securities, Al Rajhi Capital, First Abu Dhabi Bank, Mashreq Bank, Dubai Islamic Bank, KFH Capital Investment and Bank of China as joint managers for the potential offering.
