Saudi Electricity Co (SEC), the Gulf's largest utility, is expected to price a two-part Islamic bond, or sukuk, on Tuesday, lead managers said, with investor demand for the transaction already proving strong.
Order books for the planned ten-year and 30-year tranches are each in excess of $2.5 billion, a document from the managers said, ahead of the final day of investor meetings in London on Monday. Roadshows took place in the United States last week.
Both tranches are earmarked to be benchmark-sized, meaning they will be worth at least $500 million each.
The deal was always expected to be popular given its rarity value; it is a dollar deal from a quasi-sovereign Saudi Arabian borrower, at a time when the Saudi government doesn't issue international debt, and is a rare Saudi debt sale open to U.S. institutional investors.
The fact that the deal is also a sukuk sale in which U.S. buyers can participate adds to its rarity value, as most Islamic bond sales aren't 144a-compliant.
Earlier, initial price guidance was set at 175 basis points and 210 bps over equivalent U.S. Treasuries for the ten-year and 30-year portions.
Deutsche Bank and HSBC Holdings are arranging the roadshows and will manage the sukuk's sale.
State-owned Saudi Electric last tapped the international bond market in March 2012, pricing a $1.75 billion, two-part sukuk split between a $500 million five-year portion and a $1.25 billion tranche which had a 10-year lifespan.
The former was trading at a z-spread of 115 bps at 0915 GMT, while the longer-running tranche was at 151 bps, according to Thomson Reuters data.
The z-spread expresses relative value by calculating the number of basis points that need to be added to a zero-coupon yield curve to make the bond's discounted cash flows equal its present value.
Fitch Ratings affirmed Saudi Electric's AA- rating in February, citing high government ownership and its monopoly position despite weakening standalone credit fundamentals.