Al-Rajhi Cement issues local debt finance

Al-Rajhi Cement issues local debt finance
Published: 02 May 2011

The issuance by Al-Rajhi Cement Jordan of its debut Sukuk (a local denominated bond) in late April 2011 opens up yet another new market for sukuk origination in the Middle East and North Africa. The domestic JD85m (about US$119m) corporate sukuk offering, while symbolically important and widely welcomed by the market, however betrays a dogged refusal by successive Jordanian governments of issuing debut sovereign debt.

The Al-Rajhi Cement sukuk, which was managed by Capital Investments, the investment banking arm of Capital Bank. The 7-year issuance was subscribed by a number of leading local Islamic and commercial banks, including Capital Bank, Cairo Amman Bank, Islamic International Arab Bank, Union Bank, Jordan Kuwait Bank, Bank of Jordan, and Arab Islamic Bank. The notable absentee is Jordan Islamic Bank, one of the oldest Islamic commercial banks in the world.

Capital Investments’ CEO Omar Al-Wir stressed at the sukuk launch ceremony that is was his hope that "this alliance (with Al-Rajhi Group) will pave the way for future successful Islamic finance transactions in the Kingdom. This issuance corresponds to the growing interest in and appetite for Islamic financing instruments in the local market, and reflects the readiness of the Jordanian economy to accommodate developments in the regional and international markets, and the growing Islamic finance segment in particular."

Al-Rajhi Cement Jordan, is a subsidiary of Al-Rajhi Cement Holding (ARCH), which was incorporated at the Dubai International Financial Centre (DIFC) in July 2007, and whose main shareholder is Omar Al-Rajhi For Commercial Development and Investment Holding Co. of Saudi Arabia. Al-Rajhi Cement Jordan also operates a cement manufacturing plant in Al-Mafraq, Jordan, which started distribution in the local market during 2010.

The investment objective of ARCH "is to invest in the cement industry shares of various cement companies globally," and to develop cement assets in the region using a new approach to financing and laying the grounds for a strategic financing plan based on Shariah-compliant financing that will support the company’s growth.