KHOBAR, Saudi Arabia Nov 7 Riyad Bank , the third-largest lender by market value in the kingdom, sold an Islamic bond worth 4 billion riyals ($1.07 billion) through a private placement, it said in a bourse filing on Thursday.
The bank priced the issue at 0.68 percent over the three-month Saudi interbank lending rate. The sukuk has a lifespan of seven years but can be called - or repaid - by the bank at the end of the fifth year.
The sukuk, a rare offering from the bank, will be used to diversify its funding sources, extend the maturity of its funding and support the financing of sharia-compliant business, the statement added.
Riyad Bank is the latest Saudi lender to issue a riyal-denominated sukuk, tapping into a highly liquid local investor pool to secure cheaper, longer-term finance that would be hard to obtain through the loan market.
Many banks have issued or plan to issue Islamic instruments to boost their capital following a period of significant lending growth in the kingdom. They include Saudi Hollandi Bank , Saudi British Bank, Banque Saudi Fransi and National Commercial Bank. (Reporting by Reem Shamseddine; Editing by Andrew Torchia)