Saudi Aramco Total Refining and Petrochemical Company
(SATORP), a joint venture between Saudi Aramco and Total S.A. of France,
issued its debut sukuk Sunday and there are signs that several other
potential Saudi issuers are lining up to go to the market preferring to
raise funds in this way despite the continuing turmoil in the global
financial market and economy.
According to the latest information available Sunday, the SATORP bond issue was 3.5 times oversubscribed. (source)
According
to a statement from Saudi Fransi Capital, one of the three joint lead
managers and joint bookrunners for the transaction together with
Deutsche Securities Saudi Arabia and Samba Capital & Investment
Management Company "the aggregate face amount of SATORP's public
offering of SR-denominated certificates (the sukuk) will be
SR3,749,900,000 and the net proceeds of the offering will be the
aggregate face amount after deducting the fees of the joint lead
managers and joint bookrunners for the offering."
The Saudi
Capital Markets Authority (CMA) in August approved the public offering
of sukuk certificates by Arabian Aramco Total Services Company (AATSC),
the special purpose company which is issuing the sukuk certificates on
behalf of SATORP. The road show for the sukuk started on Sept. 10 for a
period of 16 working days.
The final pricing, according to Samba
Capital & Investment Management Company, on SATORP's public offering
of SR-denominated sukuk certificates "has been set at 6-month SAIBOR
(Saudi Arabian Interbank Offered Rate) plus a margin of 95 basis points
(bps) per annum."
This pricing is tight given that the yield for
the SR1.8 billion Mudaraba sukuk issued by Saudi International
Petrochemical Company (Sipchem) issued in June this year was SAIBOR plus
1.75 percent per annum.
The deadline for application forms to be
submitted by investors for the offering was Oct. 1, and the final
allocation was made two days later, with the deadline for the settlement
of the payment being Oct. 1 for retail investors and Sunday for
institutional investors. The minimum investment for institutional
investors was SR1 million.
The offering, sale and delivery of the
three-year SR3.75 billion sukuk, which matures in 2014, is limited
solely to Saudi nationals and those other legal persons with a permanent
establishment in the Kingdom holding a current commercial registration
number issued by the Ministry of Commerce and Industry. The sukuk
issuance was offered to financial institutions, mutual funds, insurance
companies and pension funds as well as individuals, who will be able to
subscribe to the sukuk subject to the subscription terms and conditions.
Almost
all the major sukuk issuances in the Kingdom over the last few years
have been heavily oversubscribed given that they are Saudi
riyal-denominated and the offshore documents are under English law
jurisdiction and the onshore documents and assets under the laws of
Saudi Arabia. The SATORP sukuk is no exception.
The structure of
the issuance is a Musharaka sukuk and also involving a forward lease
agreement. The issuer, Arabian Aramco Total Services Company (AATSC),
and SATORP are the partners under the Musharaka agreement and also
co-lessors under the forward lease agreement. SATORP is also the
managing partner under the Musharaka agreement and the lessee under the
forward lease agreement. The purpose of the Musharaka will be to earn
profit from the application of the respective capital contributions from
the partners in accordance with the business plan as set out in the
Musharaka agreement. The business plan entails the delivery of the
project assets and the lease of the lease assets to the Lessee.
The
structure of the Sukuk was approved by the Shariah boards of Al-Inma
Investment Company, Bank Albilad, Deutsche Bank, Samba Financial Group
and Credit Agricole CIB.
The proceeds of the sukuk will be used to
finance SATORP's planned 400,000 barrels per day crude oil refinery in
Jubail, which will process Arabian Heavy Crude and which is a project
sponsored by Saudi Aramco and Total S.A of France. SATORP is 62.5
percent owned by Saudi Aramco and 37.5 percent owned by Total S.A. The
total cost of the project is estimated at over $13 billion, and may
involve further Islamic finance facilities down the line.
In fact,
in October last year, SATORP closed a multi-source $8.5 billion 16-year
financing for the Jubail refinery project including $4.01 billion from
the Saudi Public Investment Fund and Export Credit Agencies and $4.49
billion from commercial financial institutions. The financing facilities
include dual-currency (US dollar and Saudi riyal) commercial loans;
dual-currency Islamic financing facilities; ands export credit
facilities provided by seven export credit agencies and local
developmental agencies. The Islamic finance facilities were lead
arranged by Al-Rajhi Bank; Alinma Bank; the Islamic Development Bank and
Bank AlJazira.
The state-of-the-art SATORP refinery is scheduled
to be commissioned sometime in 2013 and is part of Saudi Aramco's
strategy to boost Saudi Arabia's refining capacity by more than 1.7
million barrels a day from the current capacity of 2.1 million barrels a
day. This will include production of diesel and jet fuels; 700,000
metric tons per year (t/y) of paraxylene; 140,000 t/y of benzene; and
200,000 t/y of polymer-grade propylene.
The SATORP sukuk underpins
growing demand for Islamic financing facilities by Saudi corporates. A
few days ago Dar Al-Arkan Real-Estate Development Company (DAAR), the
Shariah-compliant developer partner of Khozam Development Real Estate
Company, announced that the Saudi Public Investment Fund (PIF) had
granted approval for a SR4 billion Islamic financing facility for the
company's Qasr Khozam Development project which is located in the south
east of Jeddah's central downtown district, covering an area of
approximately 4 million square meters.
"This funding will
contribute to the project by accelerating the development operations and
pushing ahead to the next phase of sending evacuation notifications,
the compensation and transfer of ownership of the properties located in
the project area. The governmental support of major development projects
such as Qasr Khozam Development project proves the government
commitment to the success of this project through a true joint venture
between the public and private sector to rejuvenate the old downtown
district of Jeddah," said DAAR in a statement.
Islamic finance
especially sukuk, including project sukuk, is poised to play an
important role to finance planned multi-billion dollar infrastructure
and industrial developments in the Kingdom. Saudi Aramco's planned
project spend alone is estimated in excess of $160 billion of the next
decade or so.
Muhammed Al-Jasser, governor of the Saudi Arabian
Monetary Agency (SAMA), has already urged Saudi corporates to think
seriously of raising financing through the issuance of sukuk, which he
explained, "have a very great potential in the Saudi and Gulf market.
The Saudi market is moving from traditional sources of financing such as
bank credit to corporate bond and sukuk. This is a development issue
and has started to happen. The banks may not be able to meet local
funding requirements from traditional sources given the rapid expansion
of infrastructure and projects in the Saudi economy. But this also
depends on demand and supply dynamics of the market. SAMA encourages
banks and corporates to go down the sukuk route. We would like to see
the local credit market diversified from bank finance to corporate bonds
and sukuk."
The SATORP sukuk indeed follows a number of high
profile sukuk issuances out of the Kingdom this year. In May the Islamic
Development Bank in Jeddah successfully closed its $750 million sukuk
offering, which was the latest tranche in its $3.5 billion Islamic Trust
Certificates program and priced at mid swap (US Treasuries) plus 35
basis points with a profit rate of 2.35 percent. In June, Saudi
International Petrochemical Company (Sipchem) closed a SR1.5 billion
Mudaraba sukuk, which was well over-subscribed with the order book
reaching SR4.5 billion and was priced at SIBOR plus 1.75 percent. In
July, the Saudi Binladin Group successfully closed its SR1 billion
1-year sukuk offering, which was issued through SBG Sukuk Co. and was
well oversubscribed attracting orders in excess of SR3 billion. The
privately placed sukuk was offered to sophisticated Saudi investors and
has a maturity of 364 days and pays a profit rate of 2.5 percent per
annum.
Sukuk origination in the Kingdom started in earnest in
2004 with the SR98 million CARAVAN! sukuk, which was a small issuance
and which tested market conditions. The big hitters started with the
SABIC 1 sukuk in 2006 which to date has issued three sukuk. Other major
sukuk issuers in Saudi Arabia have been Saudi Electricity Company with
three issuances; the Bin Laden Group with two issuances; Saudi Hollandi
Bank with two issuances; and Dar Al-Arkan with three issuances.
The
SATORP sukuk, together with the latest Malaysian sovereign sukuk and
others in the GCC and ASEAN region, are further indications that the
global sukuk market is fast on the road to recovery.
No comments:
Post a Comment