“The substantial demand for the sukuk, leading to an oversubscription of more than three times the target, is further proof of the confidence and resilience in the Kingdom’s economy and the financial markets,” Sipchem’s Chief Executive Officer Ahmad A. Al-Ohali said.

He said the successful completion of Sipchem’s first Sukuk issue would provide equity funding for announced new projects and help the company achieve its immediate term strategic plans.

A large number of investors expressed interest in the Sipchem sukuk with total orders received in the range of SR4.5 billion.

The Mudaraba sukuk was issued in denominations of SR100,000 subject to a minimum initial subscription amount of SR1 million.

Investors participating in the program included government institutions, insurance companies, investment and money market funds, financial institutions and individuals.

Al-Ohali expressed his appreciation to all of those were involved in managing the transaction, in particular Capital Market Authority (CMA), Deutsche Securities and Riyad Capital and auditors and advisers.

The sukuk provides Sipchem with an alternate source of funding for its projects using a Shariah-compliant Mudaraba structure.

The sukuk is a Floating Rate Note (FRN) for five years.

The investors will receive an expected return of Saudi Interbank Offered Rate (SIBOR) plus 1.75 percent per annum to be distributed quarterly.

The pricing was finalized at the low end of range of price guidance provided of SIBOR plus 1.75 percent, again demonstrating the success of the transaction and the confidence of the investors in the company’s success.

During the launch of the program in mid-June, Al-Ohali said the program was to diversify Sipchem’s sources of funding and finance the new production initiatives.

The Capital Market Authority approved the offering of the Mudaraba sukuk on June 12, 2011.

He indicated that among the positive aspects that the investors will gain through the issuance of this Mudaraba sukuk is the diversification and distribution of their savings in investments that are Shariah compliant in addition to creating more stability in the prices of their investments and the earnings of their regular returns.

Sipchem appointed Riyad Capital and Deutsche Securities as joint lead managers for the offering, issuance and receipt of subscriptions for the Mudaraba sukuk.

The Mudaraba sukuk is a program approved by the Shariah supervisory committee of Riyad Capital.

The offering, sale and delivery of the Mudaraba Sukuk was limited solely to Saudi nationals or other legal persons with a permanent establishment in the Kingdom holding a current commercial registration number.

Sipchem was established in 1999 and has a current paid-up capital of SR3.6 billion. It actively invests in the petrochemical and chemical industries.