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How Saudi’s Almarai pulled off flagship issuance after long absence

Published: Sep 2024
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Almarai Company

Photo of Danko Maras, Almarai Company.

Danko Maras

Chief Financial Officer
Almarai logo

Headquartered in the Kingdom of Saudi Arabia, Almarai produces and distributes food and beverages. It is ranked as the number one fast moving consumer goods (FMCG) brand in the Middle East and North Africa.

in partnership with

J.P. Morgan logo

The challenge

Tapping the bond market is a stressful exercise for treasury teams at the best of times. Add in just one marketing day after a four-year absence from the market; high interest rates, additional borrowing on earlier 2019 issuance, new company auditors and a tight regulatory timeline and Saudi Arabia’s giant dairy group Almarai was balancing multiple factors when it went to market with a US$750m ten-year sukuk issuance last July.

“We wanted to arrange repayment of a sukuk due in March 2024 and manage the minimum cost of carry and achieve the maximum tenor possible,” explains Danko Maras, Chief Financial Officer.

The solution

Almarai’s bond priced with a re-offer spread of 145bps over US Treasuries following rapid investor demand after a roadshow with over 40 global investors. Initial Pricing Thoughts (IPTs) set at 180bps, but Almarai received IOIs that were far more than the envisaged issue size and the transaction was firmly oversubscribed with an orderbook of more than US$2.85bn.

The strength of the book allowed Almarai to revise pricing guidance to 155bps representing a tightening of 25bps and despite the spread compression, the orderbook continued to grow and peaked at US$5.8bn, representing a 7.7x oversubscription. The final yield set at 5.233%, 35bps inside IPT levels.

This transaction confirmed investor demand for Saudi Arabia’s fast-growing companies, following the second international issuance by Almarai in 2019 when the company sold US$500m bonds.

(Global Coordinators, Joint Lead Managers & Bookrunners – HSBC and Standard Chartered Bank. Joint Lead Managers & Bookrunners – Citi, Dubai Islamic Bank and J.P. Morgan. Legal Advisors – White & Case and Allen & Overy.)

Best practice and innovation

Almarai’s issuance was the largest BBB/BBB- rated GCC deal in over three years for a USD benchmark senior unsecured sukuk.

The transaction marks Almarai’s return to the capital markets after a four-year hiatus and represents the GCC’s largest oversubscribed trade for a BBB-/BBB rated issuer (7.7x oversubscription) in the last two years.

The deal achieved a strong and resilient orderbook that peaked at over US$5.8bn covering the transaction over 7.7x. The deal also executed within a tight deadline with a negative new issue premium as compared to market with tightening of 35bps.

Key benefits

  • Cost savings.

  • Process efficiencies.

  • Return on investment (ROI).

  • Risk mitigated.

  • Improved visibility.

  • Future-proof solution.

  • Exceptional implementation (budget/time).

  • Quality accreditation achieved.

“This transaction is yet again a reflection of the strength of the market, where liquidity is there to be tapped through appropriately executed transactions. Swift and astute pricing and execution strategy with a one-day marketing strategy to refresh our credit story to international investors,” explains Maras.

Khalid Fayez

CEO, J.P. Morgan Saudi Arabia

Supporting Almarai, the largest integrated consumer food producer in the Middle East, has been a privilege for J.P. Morgan. Almarai’s return to international debt markets was marked by a US$5.8bn order book, 7.7 times oversubscribed, reflecting robust investor confidence. They achieved their longest maturity and tightened approximately 40 basis points compared to their prior transaction. This success, despite regional competition, underscores Almarai’s financial strength. We are proud to have facilitated this milestone and look forward to their continued growth.

in partnership with

J.P. Morgan logo
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The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards

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