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Saudi Arabia: Sabic to issue a multi-billion riyal Islamic bond

Saudi petrochemicals company Sabic will issue domestic sukuk bonds with a total value of at least SR1 billion ($267 million), according to the company’s financial vice-president, Mutlaq al-Morished. The bond should be finalized this month or next, with huge demand expected from the paper-hungry local market.

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.

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