The yield on the issue is also below the 160 bps above Sibor at which the Gulf’s largest power utility priced its previous sukuk issue of the same size, underscoring an easing in credit conditions in Saudi Arabia after a tough 2009.
The sources, who asked not to be identified, said the state-controlled power utility’s bonds would start trading on the bond market before May 24. “The new Islamic bond will start trading within a couple of days, either this week or the coming week at worst,” one source said.
Saudi Electricity raised the tenor of the bond to seven years, up from the five-year notes it issued in its previous two sukuks, the sources said.
Being a utility company, Saudi Electricity wanted to go for longer tenors in previous issues but markets were volatile back then, according to the sources.
“The situation now has changed in the local market ... But in the case of Saudi Electricity, this is a utility that keeps the lights on, one that the government would want to keep afloat,” one of the two sources said.
About 95 percent of the demand for the issue came from Saudi institutions with only 5 percent coming from non-Saudi investors, the source said.
Saudi Electricity’s Chief Executive Ali Saleh Al-Barrak said last month the group would raise between SR5 billion and SR7 billion from this issue, its third since 2007.
In addition to the SR7 billion SEC raised last year, the company took another SR7 billion from a maiden issue in 2007.
HSBC and Samba Financial Group are joint lead managers on the offer.
Saudi firms are leading a gradual recovery in regional debt markets after Dubai’s government in March unveiled a $9.5 billion support plan for conglomerate Dubai World, which rattled markets in November with news it would ask for a standstill on some of its debt.
As a result, Gulf Arab fixed-income markets remained largely shut for months, but are now slowly reopening with a series of issues led mainly by Saudi firms.