By Alex Warren “The minimum amount we expect to generate is SR1 billion,” says al-Morished, “but this could reach up to SR3 billion. We have been talking to Saudi British Bank about arranging the deal, and interest in the issue has already been extremely high in Saudi Arabia.”
Riyadh-listed Sabic is owned 70% by the Saudi government and 30% by GCC investors, which has led some analysts to consider the sukuk as effectively a sovereign issue rather than a strictly corporate bond.
Its release should provide a welcome confidence boost to the kingdom’s limited secondary market. Sabic announced record profits for 2005 and, as the largest listed company in the region, dominates Saudi Arabia’s Tadawul exchange with a market capitalization of more than $175 billion.
Although the company is based in Saudi Arabia, where it produces petrochemicals, fertilizers, polyester and other oil-derived material, it also controls a Netherlands-based subsidiary, Sabic Europe, which boasts a A5 billion-plus turnover.
On May 1, Sabic also signed a $1 billion murabaha loan with Deutsche Bank, which simultaneously opened its first Saudi branch. The deal has been signed as a five-year facility and is the biggest-ever Islamic loan of its kind in the Saudi market.
“The agreement with Deutsche grew out of our discussions with them in Riyadh,” says al-Morished. “It wasn’t in the pipeline for a long time, and we’re a cash-rich company with no urgent need for funds, but this was a good opportunity for us and a good business deal. It’s a general purpose loan to fund all kinds of projects.”
Sabic has embarked on a number of big investments, including a 35% share in a SR12 billion petrochemicals joint venture, Saudi Kayan, which is set to list part of its shares on the Tadawul and begin operations in 2009.
A CEO and board have already been appointed for the new firm, says al-Morished, who remains confident that the listing will attract massive investor interest despite the sharp downward correction in the Tadawul since the beginning of the year.
China is also being targeted, with Chinese president Hu Jintao recently visiting Sabic to discuss the company taking a 50% stake in a SR20 billion naphtha plant in China. According to al-Morished, the project is still pending full approval from the Chinese authorities.
