UPDATE 1-Saudi Electric cuts yield guidance on new sukuk-lead

Wed May 5, 2010 7:05pm IST

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* Saudi Electricity prices 3rd sukuk at 95 bps above Sibor

* Previous sukuk were priced at 160 bps above Sibor

(Adds details, background)

RIYADH, May 5 (Reuters) - Price guidance for state-run Saudi Electricity Co's (SEC) 5110.SE five-year Islamic bond is at 95 basis points above the Saudi Interbank Offered Rates (Sibor), a lead manager said on Wednesday.

This is below the 160 bps premium above Sibor at which the Gulf's largest power utility by market value priced its previous sukuk issue of 7 billion riyals ($1.9 billion) in 2009. [ID:nLS415898]

The lower yield is significant because it could underscore an easing in credit conditions in Saudi Arabia after a tough 2009.

SEC Chief Executive Ali Saleh al-Barrak said last month the group would raise between 5 billion riyals and 7 billion from the current issue, its third since 2007. [ID:nLDE63A0D8]

SEC has yet to decide the final size of the issue, said Rajiv Shukla, managing director and head of global capital finance at HSBC Saudi Arabia.

"The sukuk issue has been priced at 95 bps above Sibor. They have not yet fixed the amount as the book is still open and will be closed later today.

"The company will decide on the allocation later this week and will fix the amount to be taken by Sunday or Monday," Shukla told Reuters.

HSBC and Samba Financial Group are joint lead managers on the offer.

A source familiar with the deal said the company would raise 7 billion riyals from the issue. "Saudi Electricity will take the maximum amount given the attractive pricing," the source said.

SEC spokesman Joumaan al-Zahrani declined to comment saying only that the issue had already been oversubscribed.

In addition to the 7 billion riyals SEC raised last year, the company took another 7 billion from a maiden issue in 2007. [ID:nLS415898]

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 [DBWLD.UL], 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.

Banque Saudi Fransi 1050.SE raised $650 million in a bond sale in March. [ID:nLDE62N06O]

In February, builder Dar al-Arkan 4300.SE raised a lower-than-expected $450 million from a sukuk issue a few weeks after Saudi Hollandi Bank 1040.SE raised $193 million from its second sale of a sukuk under a private placement. (Reporting by Souhail Karam; Editing by Firouz Sedarat and David Holmes) ($1=3.750 Saudi riyals)

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