JEDDAH, 5 July 2006 — Saudi Basic Industries Corp. (SABIC) has received an approval from the Saudi Capital Market Authority (CMA) to launch Islamic bonds (sukuk). It can now issue bonds up to SR3 billion.
The minimum value for each of these sukuk is SR50,000. The minimum subscription shall be SR500,000 (10 sukuk per subscriber). If the amount is greater than SR500,000, it will be calculated in multiples of SR50,000.
This sukuk will be the first to be launched in Saudi Arabia under the new Capital Market Law. HSBC Group, one of the world’s largest banking and financial services organizations, has been appointed as the lead manager and book runner for this pioneering issuance.
To be issued directly by SABIC, the SABIC sukuk will be the first to be approved by a Shariah Committee of a Saudi Arabian bank, the SABB Amanah Shariah Supervisory Committee.
The sukuk will also score first on a number of other fronts, notably the first to be admitted on the official list of the CMA, the first fully tradable sukuk to be issued in the Kingdom, and the first to be settled/cleared through Tadawul (the Saudi stock exchange). The sukuk will establish a template for other sukuk and non-equity capital market issuances to follow, thereby further facilitating innovation and economic growth in Saudi Arabia.
Despite CMA’s announcement on Monday, SABIC’s shares declined 3.49 percent yesterday to close at SR173.
“In these times of growing competition, upholding our quality standards and increasing output are business imperatives. With optimum use of investments at its facilities and through a series of plans geared toward expanding capacity, SABIC has been able to meet its market requirements,” Prince Saud ibn Thunayan Al-Saud, chairman of the SABIC board of directors, said in SABIC’s Annual Report 2005.
SABIC Vice Chairman and Chief Executive Officer Mohamed Al-Mady said recently that SABIC’s expansion projects are on track to increase the company’s total annual capacity to 64 million metric tons by 2008.
SABIC’s profit rose to a record SR19.2 billion in 2005, a 35-percent increase on 2004 and the company’s highest profit since inception. Sales revenues for 2005 totaled SR78.3 billion, making SABIC the largest and most profitable public company in the Middle East.
Initially, the issuance of sukuk shall be limited to financial institutions and major companies. Individuals may participate through various bank investment funds. Other issuances will expand to cover individuals directly following completion of essential mechanisms of the component authorities.
SABIC has increasingly begun utilizing Islamic financing techniques for its fundraising. The company recently raised the largest ever Islamic finance tranche in a Greenfield project with the financing for the Yanbu National Petrochemicals Company (YANSAB) affiliate, in addition to a recent $1-billion Murabaha finance agreement with Deutsche Bank. This sukuk demonstrates SABIC’s continued commitment toward developing the scope and breadth of Islamic financing.
SABIC sukuk further demonstrates SABIC’s endeavors to diversify the sources of finance for its investment projects which will contribute to developing the Saudi capital market and help develop the Saudi economy. Prince Saud ibn Thunayan said, “SABIC believes that its focus on innovation and excellence are fundamental to success. There is no room for complacency in our strong commitment to business.”