Sabic delays Al-Kayan debt
Saudi Basic Industries Corporation (Sabic) has been forced to delay offering $1,800 million in project finance debt to the market, to fund its Al-Kayan project, because of the knock-on effects of the global credit crunch.
It is the second time Sabic has fallen victim to the markets recently. Investors reassessing the pricing of financial risk in the wake of heavy losses connected with loose lending practises in the US mortgage market.
Under the original Al-Kayan financing schedule, financial advisers BNP Paribas, Arab Banking Corporation and Samba Financial Group, would have taken the $1,800 million commercial bank tranche of the $9,000 million project to the market by the end of August.
However, they have had to factor in a delay while Sabic raises $1,500 million worth of bonds to help fund the acquisition of GE Plastics.
Sabic had planned to raise nearly twice that amount for the GE deal, but had to cut back because of a lack of appetite in the market and increasing interest costs on bonds (MEED 23:8:07). As a result of these difficulties, arranging the project finance debt has been delayed to give the first set of bonds a clear run at the market.
A banker close to the deal says: 'You cannot raise nearly $5,000 million in Sabic debt in a short time without doing something to market appetite, so it is no surprise that the bonds have had to be downsized and the project finance tranche delayed.'
Documentation for the $1,800 million commercial bank tranche to finance the Al-Kayan plant is complete and waiting for banks to sign, although this is unlikely to occur until October. The delay is not expected to affect the timescale for construction of the plant. Sabic was unavailable for comment.
www.meed.com/bankingfinance
Saudi Basic Industries Corporation (Sabic) has been forced to delay offering $1,800 million in project finance debt to the market, to fund its Al-Kayan project, because of the knock-on effects of the global credit crunch.
It is the second time Sabic has fallen victim to the markets recently. Investors reassessing the pricing of financial risk in the wake of heavy losses connected with loose lending practises in the US mortgage market. Under the original Al-Kayan financing schedule, financial advisers BNP Paribas, Arab Banking Corporation and Samba Financial Group, would have taken the $1,800 million commercial bank tranche of the $9,000 million project to the market by the end of August. However, they have had to factor in a delay while Sabic raises $1,500 million worth of bonds to help fund the acquisition of GE Plastics. Sabic had planned to raise nearly twice that amount for the GE deal, but had to cut back because of a lack of appetite in the market and increasing interest costs on bonds (MEED 23:8:07). As a result of these difficulties, arranging the project finance debt has been delayed to give the first set of bonds a clear run at the market. A banker close to the deal says: 'You cannot raise nearly $5,000 million in Sabic debt in a short time without doing something to market appetite, so it is no surprise that the bonds have had to be downsized and the project finance tranche delayed.' Documentation for the $1,800 million commercial bank tranche to finance the Al-Kayan plant is complete and waiting for banks to sign, although this is unlikely to occur until October. The delay is not expected to affect the timescale for construction of the plant. Sabic was unavailable for comment. www.meed.com/bankingfinanceThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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