Al Rajhi Bank Launches $1 Billion Sustainable Sukuk

Al Rajhi Bank, the largest Islamic bank globally, has recently launched $1 billion in Additional Tier 1 sustainable sukuk, also known as Islamic bonds. These sukuk are a form of debt issuance that comply with Islamic principles.

The final yield for this sukuk issuance was set at 6.375 percent, lower than the initial estimate of around 6.875 percent. These sukuk are perpetual, meaning they have no fixed maturity date, but the issuer has the option to redeem them starting from May 2029.

The offering received an overwhelming response, with orders exceeding $3.5 billion. The bank is now in the process of allocating the sukuk to investors.

Additional Tier 1 (AT1) bonds are considered the riskiest type of debt that banks can issue. They are designed to provide banks with a cushion of capital in times of financial stress. These bonds have features that allow for loss absorption in case the bank faces difficulties.

Al Rajhi Bank's introduction of $1 billion in sustainable sukuk marks a significant move in the Islamic finance industry. The successful issuance of these sukuk reflects the bank's strong market position and investor confidence. This initiative not only strengthens the bank's capital base but also demonstrates its commitment to sustainable financing practices.