MANAMA, (Reuters) – Saudi Basic Industries Corp (SABIC) gave price guidance for an Islamic bond sale to raise up to $1.33 billion, as it seeks to tap investor appetite for bonds denominated in riyals, an arranger said.
The world’s biggest chemicals firm by market value gave guidance of mid-40s to 50 basis points above three-month Saudi Interbank Offered Rate (SIBOR) on the 5-year bonds, said Rajiv Shukla, an HSBC managing director of investment bank finance.
The bonds, denominated in the dollar-pegged Saudi currency, provide an investment vehicle for Gulf investors starved of choice, Shukla said.
“Welcome to the Saudi market. It’s very liquid and there is a lack of local assets,” he said.
SABIC’s 10-day bond sale started on Saturday and ends on May 12, by which time final pricing and the sale’s final size should be announced.
Ratings agency Standard and Poor’s assigned the Islamic bonds, or sukuk, an A+ rating. HSBC Saudi Arabia and Calyon Saudi Fransi are joint lead managers for the sale.
SABIC is raising the money to finance projects and for general corporate purposes, its Chief Financial Officer Mutlaq al-Morished told Al-Arabiya television in April.
In January, the firm signed a joint venture agreement to build a $1.7 billion petrochemical complex in China, and has said it was looking to build another plant in India.
Morished also said the time was right for a bond issue because Saudi Arabia, the world’s largest oil exporter, was awash with cash after oil prices jumped six-fold in the last six years.
SABIC’s current sukuk sale is its third, and Islamic bonds it sold in July were priced at 38 basis points over SIBOR.
SABIC is one of a number of firms to hold sukuk sales in recent weeks, most denominated in Gulf currencies, as firms seek to capitalise on bets that Gulf states may revalue their currencies to ward off soaring inflation.
Previously, most sukuk were sold in dollars, but there has been a lull in issuance since last summer’s global credit crunch triggered by defaults on U.S. home loans.