Saudi Arabia's PIF to list debut $3.5bn Islamic bonds on London Stock Exchange

The dual-tranche sukuk by the kingdom's sovereign wealth fund was more than seven times oversubscribed

Saudi Arabia's PIF is at the centre of the kingdom's diversification strategy. EPA
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Saudi Arabia’s Public Investment Fund will list its first dollar-denominated $3.5 billion Islamic bonds on the London Stock Exchange's International Securities Market, as the sovereign wealth fund continues to diversify its funding sources.

The dual-tranche international Islamic bonds, or sukuk, drew strong demand from international and regional institutional investors, PIF said on Thursday.

It was oversubscribed more than seven times, with the order book exceeding $25 billion. The five-year $2.25 billion sukuk matures in 2028 while the 10-year $1.25 billion sukuk matures in 2033.

Proceeds from the issuance will be used for its general corporate purposes, a statement added.

“This inaugural international sukuk issuance is another milestone for PIF’s medium-term capital raising strategy and a continuation of our efforts to diversify our funding sources,” Fahad AlSaif, head of PIF’s global capital finance division, said.

The high level of investor demand validates PIF’s robust credit profile, which we are determined to maintain and enhance,” Mr AlSaif added.

The sukuk is part of the PIF’s newly established international trust certificate issuance programme, and it comes after the issuances of two green bonds worth $8.5 billion, and a $17 billion corporate loan last year.

Global sukuk issuance is forecast to “level off” in the range of $170 billion to $175 billion in 2023, after a 10 per cent fall in 2022 to $178 billion, Moody’s Investors Service said in a research report in March.

Although Saudi Arabia and Malaysia will continue to lead global sukuk issuances, the potential for growth in other jurisdictions also remains high, Moody’s said.

Long-term sovereign sukuk issuance is expected to stabilise in 2023 after two years of declines at around $80 billion, before rising to $85 billion in 2024.

Saudi Arabia, the top Arab economy, is the world’s largest Islamic finance market with total assets across sectors exceeding 3.1 trillion Saudi riyals ($826.7 billion), the governor of the Saudi Central Bank (Sama) said in August.

The kingdom is also the largest global issuer of sovereign sukuk. Its co-operative insurance sector is the fastest growing worldwide, approaching 27 per cent growth in 2022, Ayman Al Sayari said at the time.

The PIF is one of the world’s largest sovereign wealth funds, with about $620 billion in assets under management.

Loans and debt instruments represent one of PIF’s sources of funding. Other sources include retained earnings from investments, capital injections from the government and government assets transferred to PIF.

Over the past years, PIF has been working to diversify its funding sources.

The PIF has established 89 companies since 2017. It is focused on 13 strategic sectors and is mandated to pump $40 billion to $50 billion into the local economy annually to generate jobs and grow the non-oil economic base of the country.

Updated: October 19, 2023, 5:08 PM