DUBAI, 23 November 2004 — Petrochemicals giant Saudi Basic Industries Corp. (SABIC) said yesterday it plans to issue Saudi Arabia’s first major domestic corporate bond next year, worth up to SR1 billion ($267 million), to help finance its global expansion. “(It will be) most likely within the one billion Saudi riyal range,” Homood Al-Tuwaijri, SABIC Vice President for Petrochemicals Coordination, told Reuters. “I would like to think we’d be in a position (to do it) within 2005.”
If it goes ahead, the SABIC bond will be the first major domestic corporate issue in the oil-exporting kingdom. “It could be the start of major changes to the balance sheets of Saudi companies,” one Saudi banker said. Bankers say the issue will be managed by HSBC. Tuwaijri, speaking at a petrochemicals conference in Dubai, said preparations have reached an advanced stage and predicted strong local interest in the bond. “There is considerable appetite in the domestic market for SABIC assets,” he said.
SABIC was also investigating getting a credit rating so it will have the option of borrowing on international markets. “(We are) working diligently to establish access to a variety of funding sources, so that down the road an international bond issue is something SABIC ought to be able to access,” Tuwaijri said.
The Middle East’s top petrochemicals producer said last month net profits for the first nine months of the year doubled to SR9.56 billion, helped by its access to cheap feedstock and Asian markets as well as high world prices for its products. But Tuwaijri, who until May was vice president for corporate finance, said the world’s most profitable petrochemical company has also seen lean years in the past. “We also want to maintain an optimal leverage position,” he said. Keeping a portion of capital on the debt markets is “just prudent and sensible balance sheet management”. Most of its plants are based on Saudi Arabia’s eastern Gulf coast but it has moved into Europe and has plans for further expansion in Asia and Latin America.
SABIC is “looking at all opportunities” in China’s booming petrochemicals market — the biggest in Asia. SABIC officials have said Chinese investment could total between $2 billion-$5 billion. “Clearly everybody recognizes the criticality of China in any portfolio,” said Tuwaijri. “It’s where the market is down the road. And from a strategic point of view, we need to be close to our customers.”
Despite withdrawing from a planned project in Iran, SABIC is still pursuing opportunities in the country and also in Latin America. “Obviously we have a very good ongoing relationship with the Iranians,” Tuwaijri said. “It’s a target that remains on our radar screen.” And SABIC continues to “see Latin America as an important region to be considered”.
Tuwaijri said SABIC has also approved a SR24 billion budget for projects to be completed within Saudi Arabia by 2008.
SABIC, Saudi Arabia’s biggest listed firm in terms of capitalization, is 70 percent owned by the Saudi government. The remaining 30 percent is held by Saudi and Gulf investors.