The signing of a $5bn project financing for Maaden Waad al-Shamal Phosphate Company signals a turning point in the way the firms parent company, Saudi Arabian Mining Company (Maaden), finances its projects.
The large-scale financing will be used to fund the $7.5bn Waad al-Shamal phosphate city project, which is being developed close to the Saudi border with Jordan, as well as at an existing site in Ras al-Khair Industrial City.
The facility has numerous tranches and has brought together a group of international and local financial institutions, export credit agencies (ECAs) and government-backed investment funds. It is the first time the company has raised a significant proportion of funding from non-Saudi financial institutions, combined with funding and guarantees from international ECAs.
Previous Maaden projects have typically been dominated by Saudi banks, with perhaps one or two lenders from the Gulf or outside the region.
The size of the phosphates city scheme, however, was considered too much for the local banks to bear single-handedly. The deals popularity with banks, evidenced by the significant scaling back of commitments, suggests Maaden is an attractive client for both international and local lenders.
Maaden is now armed with the knowledge and experience to structure a deal that appeals to international lenders
The deal has also opened up new funding options for the company in the future. Maaden is now armed with the knowledge and experience to structure a deal that appeals to international lenders. The company is already exploring new ways of financing its growth plans, with plans afoot for a SR5.6bn ($1.5bn) rights issue to be used to fund both its phosphates and gold operations.
The closing of the $5bn project financing should give Maaden greater confidence when selecting new ways to finance its expansion.