Saudi Arabia’s Sahara Petrochemicals is seeking underwriters for its SR1.5bn ($400m) rights issue and has given banks until 14 July to respond to the request for proposals (RFP) for the deal.
Sahara said in mid-June that it was seeking approval from market regulators for a rights issue to raise cash for expansion projects. Later that month it sent out the RFP seeking underwriters for the deal.
Several banks in the kingdom say they will be pitching for the mandate, including some in consortium with international investment banks operating in the country.
One banker looking to bid for the deal says, “Banks will do underwriting, but they probably won’t want to underwrite the whole deal themselves, so most banks will pitch with a partner.”
Tariq al-Alaiwat, petrochemicals analyst at NCB Capital says that Sahara will use the cash for the development of its Saudi Acrylic Monomers Company (SAMC), Arabian Chlor Vinyl Company (ACVA) and Superabsorbent Polymers Project (SAP) plants, which are due to start production at Jubail in the first quarter of 2013. The three projects are expected to cost a total of SR7bn. he says, “Sahara had intended to fund SR4.9bn of the three projects through debt.” Another local analyst says that Sahara has had trouble getting the money from banks, so has had to turn to the equity markets.
Sahara raised SR1bn through a rights issue in September 2009, which it said was also for the development of the three Jubail projects. That deal was underwritten by the local Saudi Hollandi and Albilad. It involved increasing the company’s share capital by over 56 per cent. Investors oversubscribed the deal by 124 per cent. Shares were sold at a par value of SR10 and the new rights issue is also expected to be at par value.
A timetable for the new rights issue has not been announced, but it could occur before the end of the year. Investors have been selling Saudi petrochemicals stocks spooked by fall in the oil price in late June, says al-Alaiwat. With the issue price of the new shares at SR10, well below the company’s trading price, investors should still have opportunity to profit from the rights issue. Sahara was trading at SR18.35 on 5 July.
The company did not respond to requests to comment on the rights issue.