Saudi Aramco, Dow Venture to Pay 1.25% Above Libor on Bank Loans

Sadara Chemical Co., the Saudi Arabian company that raised $10.5 billion in debt this week, will pay initial interest of 125 basis points over the benchmark on its dollar loans, a banker familiar with the matter said.

Interest on the loans to Sadara, a venture of Saudi Arabian Oil Co. and Dow Chemical Co. (DOW), will rise to 155 basis points, or 1.55 percentage points, above the London interbank offered rate for the first five years after construction of its chemicals facilities is completed, according to the banker, who asked not to be identified because the information is private. The rate will be 185 basis points above the benchmark for the remainder of the loan’s 16-year tenure, the banker said.

Sadara, which is building the chemicals complex at Jubail in the Eastern Province of the kingdom, raised $2.2 billion from 33 commercial banks this week as part of the financing, according to the banker. Half that facility was in dollars and the rest in Saudi riyals, the banker said.

Saudi Arabia, the world’s largest crude exporter, is boosting capacity to refine oil and produce chemicals, to meet domestic fuel demand and make materials used to manufacture consumer goods. The Sadara venture is one of state-run Saudi Arabian Oil Co.’s biggest projects, along with a refinery and chemical plant built with France’s Total SA (FP) in Jubail.

The venture raised $2 billion from the sale of Islamic bonds in April for the $19.3 billion project. The first units of the chemicals facility will begin production in the second half of 2015 and full completion is expected in 2016. The complex will be the world’s biggest erected in a single phase.

Interest on the riyal loan begins at 75 basis points above the Saudi interbank offered rate, rising to 120 basis points for the first five years after construction is completed and then to 135 basis points thereafter, according to the banker. Sadara also raised $7.05 billion from export credit agencies and $1.3 billion from the Public Investment Fund, the banker said.

An official at Sadara’s public relations department didn’t immediately comment when contacted by phone and e-mail today.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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