2008/5/31 Saudi Kayan

SAUDI KAYAN announces the signing of financing agreements

An affiliate of the Saudi Basic Industries Corporation (SABIC), the Saudi Kayan Petrochemical Company (SAUDI KAYAN), today (Saturday, May 31, 2008) entered into US$6 billion financing arrangements (SR 22.5 billion ) for 15 years with a group of banks and financial institutions to finance part of the expenses of building its new (Saudi Kayan) complex in Jubail Industrial City.

The complex will be the world's largest integrated petrochemical complex. The financing package is diverse and includes local, regional, international, Islamic and export credit agency debt. Saudi Kayan was advised by Arab Banking Corporation, BNP Paribas and Samba. The initial Mandated Lead Arrangers are ABN AMRO Bank N.V., Arab Banking Corporation, BNP Paribas, HSBC Bank plc and Samba Financial Group. The export credit agencies are ECGD, KEIC, K-EXIM and SACE. The Public Investment Fund of the Kingdom of Saudi Arabia is also providing finance to the Project. Al Rajhi Banking & Investment Corporation is providing an Islamic working capital facility.

Mutlaq Hamad Al-Morished, SAUDI KAYAN Chairman and SABIC Vice President, Corporate Finance, signed the agreements on behalf of SAUDI KAYAN. The SAUDI KAYAN complex, currently under construction, is expected to go on-stream in 4th Q 2010 with a total annual capacity of approximately 6 MTA of a variety of petrochemical products including: ethylene, propylene, polyethylene, polypropylene, ethylene glycol and a series of specialized products that will be produced locally for the first time such as: aminoethanols, aminomethyls, dimethylformamide, dimethylethanol, dimethylethanolamine, ethoxylates, and polycarbonate, acetone and others.

Al-Morished stressed SABIC s keenness to diversify the sources of financing for its projects and to optimize the utilization of available funding sources, especially Islamic financing.

SABIC holds a 35 per cent. of the shareholding in SAUDI KAYAN with a private shareholder, Al Kayan Petrochemical Company, holding a further 20 per cent. The remaining 45 per cent. is held by Saudi shareholders following an initial public offering last year.
 

February 01 2009 MEED

Debt pricing threatens Saudi Kayan SIDF funding

The Saudi Industrial Development Fund (SIDF) could pull $530m investment in $10bn petrochemicals scheme.

The SIDF has raised concerns over the $10bn Saudi Kayan project, which could result in it pulling out of a planned $530m investment in the petrochemicals scheme.

The concerns are understood to relate to the structure and pricing on its tranche of the debt. The terms of the SIDF's loan have not been revealed, but the commercial bank tranche of the debt starts at 50 basis points over the London interbank offered rate (Libor), rising to 75 basis points after the construction of the project. 1basis points=0.01%

This is far lower than other recent financing deals in the region, most of which have been priced at more than 200 basis points over Libor.

If the concerns raised by the SIDF are not resolved, the government-backed fund may decide to pull its investment in the project, according to project sources.

"The SIDF has identified several problems with the structure of the deal that it wants addressed before it commits money to the project," says one banker close to the project.

Under the terms of the financing deal, the fund has until the end of the construction period, which is likely to be October 2010, to resolve its concerns over the project. If by that stage it still has doubts, it could pull out.

Saudi Basic Industries Corporation (Sabic), a 35 per cent shareholder in the Kayan project, says if this happens, it will step in and fill the funding gap to ensure the scheme proceeds.

The deal was signed in July 2008 with a group of 15 banks, as well as the SIDF and the government-backed Public Investment Fund (PIF). Several export credit agencies including Korea Export Insurance Corporation, the Export Import Bank of Korea, Italy's Gruppo Sace and the UK's Export Credits Guarantee Department also signed up to the deal.

The SIDF's concerns are the latest in a series of problems with the financing for the huge petrochemicals project. In late 2007, syndication of the $1.8bn commercial debt tranche was delayed by Sabic, which was trying to raise a $1.5bn bond to fund its GE Plastics acquisition at the same time and wanted to avoid having two deals in the market concurrently.

Financial close on the project was further delayed as the commitments of some banks expired while Sabic waited for the PIF to sign the documents on the financing deal.

Sources within the financing group say most banks that financed the deal did so in an attempt to ensure their existing relationships with Sabic were not undermined.

However, the structure and pricing of the deal leaves little room for them to make any profit, especially given the sharp increase in the banks' own costs of funding since the deal was signed.

The Jubail-based Saudi Kayan complex will be the largest single-phase integrated petrochemicals project ever built, and will produce more than 6 million tonnes a year of chemical products.