Saudi Hollandi Bank (SHB) announced yesterday the successful closure of its SR775 million issue on Monday, which is the first tranche of a SR1.5 billion Tier-II Sukuk issuance recently approved by the bank's shareholders.

"The successful closure of this Sukuk puts SHB as the first bank in the Middle East to support its capital in a Shariah-compliant manner," SHB's Chairman Mubarak Al-Khafrah said after closure of the issue.

He added that the decision to support the bank's capital is aimed to help SHB achieve its plans to grow its Shariah-compliant services and products to meet client requirements and also to achieve higher returns for shareholders.

He continued that "The Kingdom is one of the fastest growing markets in the world for Islamic banking and finance and with this Sukuk issue, SHB extends its long tradition of bringing innovative financing solutions to the Saudi market." Al-Khafrah also thanked SHB's Shariah Committee for their guidance and support in the Sukuk transaction. Geoff Calvert, SHB's managing director, explained, "the SR775 million Mudaraba Sukuk is a Shariah-compliant follow-up to the bank's first Tier-II capital bond for 700 million that was issued in 2004." He added that, "SHB's Sukuk issue is the first by a bank in the Middle East and is expected to set the standard for future Shariah-compliant debt issues in the Kingdom and the region."

The Sukuk is a Floating Rate Note (FRN) with tenor of 10 years, with an option to call it at the end of 5 years. Investors will receive a return of SIBOR (Saudi interbank offered rate) plus 2 percent per annum to be distributed bi-annually. The principal investment amount will be returned as a bullet payment on maturity.

Calvert further explained that, "the bank has successfully closed this issue with a positive response from a number of major institutional, corporate and private clients." Saudi Hollandi Capital acted as sole lead manager & book runner for this transaction.

Source: AJP and http://www.islamonline.com