Five banks have arranged $305 million worth of commercial financing for a petrochemicals joint venture in Saudi Arabia led by Chevron Corporation of the US. The project is the first entirely private industrial project in the country to be financed on a limited recourse basis.

The Saudi Chevron Petrochemical Company, a 50:50 joint venture between Chevron and the local Saudi Industrial Venture Capital Group (SIVCG), plans to build a $650 million aromatics plant at Jubail in eastern Saudi Arabia. The financing was arranged by Chase Investment Bank, Industrial Bank of Japan, Gulf International Bank, Saudi Cairo Bank and Saudi Investment Bank. It was priced at 112.5 basis points over the London interbank offered rate (Libor), and 16 banks took part in the syndication. A contract to build the plant was awarded to Japan’s Chiyoda Corporation in February (see Saudi Arabia).

It is understood that the financing is split into three tranches. The first is a $275 million loan to cover part of the cost of construction of the plant. The second is a $11 million working capital facility, and the third a $19 million revolving facility intended to cover any delays in the delivery of matching financing from the Saudi Industrial Development Fund – a government body that provides interest-free loans to industrial projects. The sponsors of the project are providing completion guarantees to the banks, but after completion there is ‘very limited recourse,’ a source close to the deal says. There is no export credit agency involvement.

The pricing reflects the fact that the petrochemicals plant is being built from scratch. It may also take into account the fact that, unlike other petrochemicals schemes in Saudi Arabia, it does not have the state- controlled Saudi Basic Industries Corporation (Sabic) as a sponsor. The project’s strengths from a bank’s point of view are the backing of a major US corporation and the number of prominent Saudi businessmen involved with the SIVCG. ‘Sabic isn’t there, but there is a Who’s Who of the Saudi private sector,’ says a banker familiar with the deal.