The sukuk (Islamic bond) to finance the $19.3bn Sadara Chemical project is understood to be oversubscribed, and the final size is set to close to the upper end of the size limit of around $2.5bn.
“The book building is largely complete and it is several times oversubscribed,” says one source close to the sukuk issue. The sukuk is set to be finalised and issued on 2 April.
According to the prospectus for the sukuk, the size of the deal will be between $1.4bn-2.5bn. Sources in the kingdom also say the sukuk pricing will be “significantly lower than the bank financing”.
Depending on the final size of the sukuk, a $2.6bn bank tranche could be reduced in size. The bank tranche is split between Saudi riyal loans priced at 75 basis points above the Saudi interbank offered rate (Sibor), stepping up to 120 basis points, and then 135 basis points, and a dollar tranche priced at 125 basis points above the London interbank offered rate (Libor), stepping up to 155 basis points after construction is completed, and then 185 basis points during the 16-year tenor of the loans.
The rest of the $12.6bn debt financing will come from $7.3bn export credit agency facilities and $1.3bn from the Public Investment Fund.
The Sadara Chemical sukuk is the first time a project bond has been issued in the kingdom before the rest of the funding for a project has been put in place. The sukuk to fund the Saudi Aramco & Total Refining & Petrochemical Company (Satorp) project in 2010 was issued as replacement debt for bank loans that were already in place.