Largest Saudi shopping mall operator Arabian Centres to issue Islamic bond

Arabian Centres Company, the largest mall operator in Saudi Arabia, plans to issue a US dollar-denominated Islamic bond, marking the kingdom’s first corporate international bond issuance in 2021.

Proceeds from the sukuk will be used for “general corporate purposes” and to meet the company’s financial and strategic objectives, Arabian Centres said in a statement to the Tadawul stock exchange yesterday.

“The number and value of any sukuk to be offered will be determined based on market conditions and the company’s financial condition, funding requirement and strategy,” Arabian Centres said in the bourse filing. “The sukuk offering will be subject to the approval of the relevant regulatory authorities.”

In 2019, Arabian Centres issued its debut $500 million five-year international sukuk after raising 2.47 billion Saudi riyals ($658.8m) through its initial public offering in the same year. The IPO was the country’s biggest since local lender National Commercial Bank raised $6bn in 2014.

Moody’s Investors Service assigned a Ba2 rating to Arabian Centres’ planned sukuk issuance.

The planned sukuk will be “benchmark size” ($500m or more), with proceeds being used to repay $200m drawn under a revolving credit facility and the rest to finance future capital spending, the agency said.

Moody’s also upgraded to Ba2 from Ba3 rating on the $500m sukuk due in 2024.

Arabian Centres Company’s corporate family rating is unchanged at Ba2. All ratings are on negative outlook.

“Post-transaction, ACC’s unsecured debt will increase to above 50 per cent of total debt [excluding leases and unamortised transaction costs] from 26 per cent as of December 2020 and as a result, the CFR will reference an unsecured rating,” Moody’s said.

The company has “good liquidity” despite lost rental income owing to discounts agreed with tenants during lockdowns when its malls were closed.

Arabian Centres, established in 2002, is owned by Saudi Arabian retailer Fawaz Alhokair Group. It operates 21 shopping malls in 11 cities totalling more than 4,300 retail stores, according to its website.

Moody’s Investors Service assigned a Ba2 rating to Arabian Centres’ planned sukuk issuance