Saudi Basic Industries Corporation (Sabic) has borrowed over $4bn from local lenders in the wake of dropping plans to issue an international bond in May that was expected to have been over $1bn in size.

In the last few months the company has secured several bilateral loans with banks in Saudi Arabia, including a SR3.75bn ($1bn) loan with Alinma in mid-June, followed by a SR4.5bn loan from National Commercial Bank (NCB) later that month.

Sources in Saudi Arabia indicate that several other loans have also been quietly arranged by the industrial company, including a deal with the Public Investment Fund (PIF) to borrow around $800m and bilateral loans with Banque Saudi Fransi and Sabb, the Saudi affiliate of the UK’s HSBC.

The loans, all denominated in Saudi riyals, total over $4bn according to bankers in the kingdom close to Sabic. A banker who worked on one of Sabic’s largest recent loans says, “There is no stipulation in our deal about how the money is used.”

However, another source at a large bank in Saudi Arabia says the cash will be used for a number of purposes, including cost overruns on the $10bn Saudi Kayan petrochemicals facility at Jubail, which is 35 per cent owned by Sabic. The project is a joint venture with Saudi Arabia Mining Company (Maaden). The rest of the funds will be allocated to GE Innovative Plastics, paying down debt and capital expenditure purposes.

During late May Sabic conducted a roadshow of international investors for the bond issue (MEED 17:05:10). The company decided not to complete the issue though. Pricing was expected to be around 150-175 basis points above mid-swaps. One London-based banker close to the bond issue says, “Sabic was doing the bond issue to diversify its funding base and raise their profile internationally.” He adds that no specific allocations for the bond issue were given at the time.

Sabic has said that it has to repay loans of SR5.54bn in 2010 and SR11.26bn in 2011. The company did not respond to requests to comment on the recent spate of borrowing.