Linklaters advises on the first Basel 3-compliant additional tier 1 capital issuance in the Kingdom of Saudi Arabia and on the first Basel 3-compliant additional tier 1 capital sukuk issuance in the State of Qatar

Linklaters has advised The National Commercial Bank ("NCB") on its issuance of a SAR1bn additional tier 1 capital sukuk (Islamic bond) and has also advised on the issue by Qatar Islamic Bank (“QIB”) of QAR2bn additional tier 1 capital sukuk. The NCB transaction is the first tier 1 capital issuance in the Kingdom of Saudi Arabia that will be recognised as Basel 3-compliant additional tier 1 capital, following implementation of Basel 3 capital requirements by The Saudi Arabian Monetary Agency. 

The QIB transaction is the first tier 1 capital sukuk issuance in the State of Qatar that will be recognised as Basel 3-compliant additional tier 1 capital, following implementation of Basel 3 capital requirements by the Qatar Central Bank.

The NCB transaction follows NCB’s issuance of tier 2 capital sukuk in 2014, which is recognised as part of the bank’s Basel 3-compliant tier 2 capital resources and was the largest capital markets issuance by a financial institution in Saudi Arabia and the largest subordinated instrument by a financial institution in the MENA region at the time.  

The NCB and QIB sukuk issues were issued on the basis of a sukuk mudaraba structure. The sukuk are deeply subordinated perpetual instruments and contain a “non-viability” write-off provision, as required under Basel 3.

This follows advising on the Al Hilal Bank additional tier 1 capital sukuk issuance in June 2014, the first Basel 3-compliant additional tier 1 sukuk in the United Arab Emirates.

Jonathan Fried, who leads the capital markets practice for Linklaters in Dubai, said:

“The closing of the NCB transaction represents a real milestone for Saudi Arabia’s regulatory capital markets and, in the context of recent Saudi stock exchange reforms, comes at an interesting time for the Saudi capital markets. We are delighted to have been able to advise NCB on this significant transaction, following on from their tier 2 issue last year. We have also seen Basel 3-compliant  capital issuances throughout the region, including Qatar and the UAE, as banks continue to diversify their capital and funding sources. We expect this trend to continue.”

The Linklaters team was led by Partner Jonathan Fried (Dubai), with assistance from Managing Associate Dalia Nammari and Associate Tilak Shah in Dubai.