The Saudi Capital Market Authority (CMA) has given approval to Saudi Basic Industries Corporation (Sabic) to launch a sukuk of SR3 billion ($800 million), the first in Saudi Arabia under the new Capital Market Law.  HSBC Group has been appointed as the lead manager and book runner for the pioneering issue.

The Sabic sukuk is the first to be approved by a Shariah Committee of a Saudi bank, which in  this case is the Sabb Amanah Shariah Supervisory Committee.  It will be the first to be admitted on the official list of the CMA, the first fully tradable sukuk to be issued in the kingdom, and the first to be settled/cleared through Tadawul (the Saudi Stock Exchange).  “The sukuk will establish a template for other sukuks and non-equity capital market issuances, thereby further facilitating innovation and economic growth in Saudi Arabia,” a Sabic spokesman said.
Initially, issuance will be limited to financial institutions and major companies. Individuals may participate through various bank investment funds. Other issuances will expand to cover individuals directly following the completion of essential mechanisms of the component authorities.
“The Sabic sukuk is unique in many ways and with minimal risks. It is directly underpinned by a financially sound world-leading company with diversified investments in basic industries,” the official said.
Sabic has increasingly begun utilising Islamic financing techniques for its fundraising. The company recently raised the largest-ever Islamic finance tranche in a greenfield project with the financing for the Yansab affiliate, in addition to a recent $1 billion Murabaha finance agreement with Deutsche Bank.  This sukuk demonstrates Sabic’s continued commitment towards developing the scope and breadth of Islamic financing.
“The Sabic sukuk further demons-trates its endeavours to diversify the sources of finance for its investment projects, which will contribute to developing the Saudi capital market and help develop the Saudi economy,” the spokesman said.
In other Sabic-related news, the Saudi Kayan Petrochemical Company signed a Letter of Intent (LOI) with Fluor Company to construct off-site utilities for its complex in Jubail Industrial City.
Saudi Kayan plans to operate a petrochemical complex with an annual capacity exceeding 4 million tonnes of chemical products. It will add some specialised chemicals to the Saudi marketplace that will be produced in Saudi Arabia for the first time. Sabic is the biggest single shareholder with 35 per cent of the capital of SR12 billion. Saudi Kayan holds 20 per cent and the rest will be offered for public subscription.
  The Saudi Arabian Fertiliser Company (Safco), a Sabic affiliate, reported first-half 2006 net profits of SR565.4 million compared with SR474.2 million in the same period of 2005.  Second-quarter 2006 net profits were SR290 million compared with SR 237.8 million in the same period of the previous year.