Private contractor Saudi Binladin Group has raised SR700 million ($187 million) from the kingdom's first short-term Islamic bond, opening a new window for credit-hungry firms amid tight lending conditions.

In a statement yesterday, the issue's security agent, SABB did not disclose the maturity of the sukuk. It said the placement was private, offered to Saudi investors and issued through Saudi BinLadin Sukuk, according to our sister newspaper Gulf Daily News (GDN).

'The sukuk issuance ... was oversubscribed by more than 2.5 times ... (and was) the first short-term issuance in Saudi Arabia; the first credit enhanced structure incorporating the sharing of assigned government contract payment and the first issuance to be issued on a zero coupon, discount to maturity basis,' SABB said.

Government agencies, insurance companies, mutual funds and individual investors bought into the issue, Saudi Binladin said in the statement without giving a breakdown. This was Saudi Binladin's second sukuk issue since 2008 when it raised one billion riyals, also under a private placement.

After years of rapid credit growth, the profitability of most Saudi banks has been hit over the past four quarters by hefty provisions to counter exposure to troubled Saudi firms and a slowdown in lending.