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Tue 9 Jun 2015 01:42 PM

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Saudi's Othaim Malls revives plans for debut sukuk

Sources say unit of Al Othaim Holding, which runs five malls in kingdom, has picked banks as lead arrangers

Saudi's Othaim Malls revives plans for debut sukuk
The impact of the global recession has seen worldwide sales of sukuk decline 24 percent this year to $12bn.

Saudi Arabia's Al Othaim Real Estate and Investment Co, owner of five shopping malls in the kingdom, has revived plans to issue a debut local currency Islamic bond, probably after the summer, two sources aware of the matter said on Tuesday.

Also known as Othaim Malls, the firm has picked the investment banking arms of Banque Saudi Fransi, Gulf International Bank and National Commercial Bank as lead arrangers for the riyal-denominated bond, or sukuk, the sources said, speaking on condition of anonymity as the information isn't public.

Othaim Malls is part of Al Othaim Holding, a family-owned conglomerate which includes listed food retailer Abdullah Al Othaim Markets Co. Othaim Malls couldn't be reached for comment.

The awarding of the mandate to the three banks revives a process which had been expected to lead to an issue last year.

Sources told Reuters in June 2014 that Deutsche Bank had been working with Saudi Fransi Capital to plan the deal.

However, the process was put on hold as the company underwent some internal restructuring, after which the firm sought new terms from potential arrangers, according to one of the sources.

Timing is now centred on issuing after the summer, the sources said, as activity in the Saudi capital markets slows down for the holy month of Ramadan, expected to start later this month, and then the long summer break away from the desert heat.

"It's not as well known as some of the other companies which have issued so they aren't likely to rush into a transaction," said the second source, adding the firm would likely meet with some investors to gauge potential demand before launching a former sale process.

Companies in Saudi Arabia, the largest Arab economy, have  been turning to the local currency sukuk market for their funding needs in recent years, as they sought to tap abundant liquidity in the investor market and diversify their finance sources away from traditional bank lending.

This trend is excepted to continue as the oil price plunge causes the government to burn through reserves at a record pace, sapping cash from the banking system.

After a slow start to the year, sukuk issuance in the riyal-denominated market has picked up in recent weeks, with Binladin Group, Riyad Bank, Najran Cement and the National Shipping Company of Saudi Arabia (Bahri) all announcing deals.

Saudi British Bank completed a 1.5 billion riyal ($400 million) capital-boosting sukuk last month.

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