Magazine article Global Finance

Saudi Sukuk Market Heats Up

Magazine article Global Finance

Saudi Sukuk Market Heats Up

Article excerpt

A series of three major sukuk issues in Saudi Arabia in the first week of April demonstrated the growing depth of the debt capital markets in the kingdom, where corporations are diversifying their funding away from bank loans. In the largest project-finance sukuk, or Islamic bond, ever issued, Sadara Chemical completed a $2 billion financing for the largest chemical and plastics production complex ever built in a single phase.

The $19.1 billion integrated chemical compound, located in Jubail City II in Saudi Arabia's Eastern Province, is a joint venture between Dow Chemical of the US and Saudi Arabian Oil (Saudi Aramco). The sukuk certificates have a 15.8-year term. The sale was limited to Saudi nationals or established companies holding a commercial registration number with the Saudi Ministry of Commerce and Industry, according to Milbank, the global law firm that represented the joint lead managers for the issue. The financing group included Deutsche Securities Saudi Arabia, AlBilad Investment, Alinma Investment and Riyad Capital. The issue was priced at 95 basis points over the six-month Saudi interbank-offered rate.

The sukuk issue marked the first phase of the Sadara project's senior debt capital-raising, which will include export credit facilities, as well as commercial and Islamic bank facilities. The US Export-Import Bank gave Sadara the 2013 Deal of the Year award at its annual conference in Washington on April 4. Last September, Ex-Im Bank approved a record $4.9 billion direct loan to Sadara for the export of US goods and services needed to build the complex. …

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