Oman's 12th sovereign sukuk draws 1.82x bids at 4.82%

Summary

• Oman's 12th local sovereign sukuk issue raised 150 million rials, with bids reaching 1.82 times the offer.
• Accepted profit rates averaged 4.82%, inside a narrow band of 4.75% to 4.85%.
• Oversubscription signals investor appetite for Omani government paper and eases the state's borrowing costs.

The latest

Bids for Oman's 12th domestic sovereign sukuk issue reached roughly 273.17 million rials against an offer size of 150 million, a coverage ratio of about 1.82 times, the Oman Sovereign Sukuk Company said on behalf of the government. The average accepted profit rate settled at 4.82%. The paper matures in October 2033.

Details

• The issuer: The Oman Sovereign Sukuk Company announced the results on behalf of the government of the Sultanate of Oman, represented by the Ministry of Finance, according to a statement issued by the company. The issue is the twelfth in the local sovereign sukuk programme.
• The size: The offer was set at 150 million Omani rials. Total subscription requests came in at approximately 273,172,400 rials, leaving the issue covered about 1.82 times, the statement said.
• The pricing: The average accepted profit rate was 4.82%, with a ceiling of 4.85% and a floor of 4.75%, according to the company. The 10-basis-point spread between the highest and lowest accepted rates points to tightly clustered investor bidding rather than a wide pricing range.
• The timetable: The sukuk will be issued on Thursday, the statement said. Returns are paid four times a year through to maturity.
• The maturity: The paper runs until 29 October 2033, giving holders quarterly distributions across the life of the instrument. The company did not break down the categories of investors who placed the winning bids.
• The cost angle: Coverage above the offer size means the government filled its 150 million rial target without having to accept bids at the upper end of the profit range, with the average settling 3 basis points below the 4.85% ceiling.
• The programme: The sale is part of a recurring domestic sovereign sukuk programme run through the Oman Sovereign Sukuk Company, which has now taken 12 issues to market on the government's behalf. No size or timing was announced for a subsequent issue.

Background

Sovereign sukuk are Sharia-compliant debt instruments that pay holders a profit rate rather than conventional interest. Oman issues them locally in rials, giving domestic banks and investors an outlet for government paper and the Finance Ministry a funding channel that does not rely on foreign currency markets.

Between the lines

The combination of 1.82 times coverage and an average rate three basis points under the accepted ceiling suggests demand outran supply at this price level. With accepted bids spanning only 4.75% to 4.85%, investors appear to have converged on a narrow view of fair value for Omani sovereign risk at a roughly eight-year horizon rather than demanding a wide premium.

What's next

The sukuk are due to be issued Thursday, with the first of four annual distributions to follow. Any pricing shift on the next issue in the programme would be the clearest read on whether demand holds.

Source: Oman News Agency via Argaam