Saudi Basic Industries Corp. may tap the debt market as early as this year as the world’s biggest petrochemicals maker by market value seeks financing for projects amid borrowing costs near record lows.
The state-controlled company is implementing projects valued at 40 billion riyals ($11 billion) over the next few years, Chief Financial Officer Mutlaq al-Morished said in Riyadh today. “We will tap the market sometime late this year or early next year,” he said. It’s too early to comment on the size of the bond sale, which Sabic would prefer to be Islamic, al-Morished said.
The average yield on HSBC/Nasdaq Dubai’s GCC U.S. Dollar Sukuk/Bond Index decreased 104 basis points, or 1.04 percentage points, in the past year to 3.27 percent yesterday, 18 basis points away from an all-time low on Jan. 10. The yield on Sabic’s 3 percent securities due November 2015 has tumbled 288 basis points from a high in March 2011 to 1.44 percent today, near the lowest on record.
Sabic, which in 2007 bought General Electric Co.’s plastics unit for $11.6 billion as part of a global expansion drive, last month said it plans to cut about 1,050 positions and close some assets in Europe as the company responds to lower demand. First-quarter profit dropped 10 percent as production and sales at its units declined.
When asked if Sabic’s purchase of GE unit was ill-timed ahead of the global financial crisis, al-Morished said: “Absolutely not. It’s a great deal. It’s doing fine and we’re happy with it.”
Sabic joins peers including Akzo Nobel NV and BASF SE in slimming down operations that are taking the brunt of a prolonged slump affecting construction and infrastructure, as well as consumer spending on cars and appliances. The company also faces stiffer competition from a revived U.S. chemical and plastics industry that’s benefiting from shale gas supplies.
Chief Executive Officer Mohamed Al-Mady told reporters on April 20 that Sabic is interested in investing in the petrochemicals industry in the U.S. and is studying investment possibilities in North America. MEED reported in August last year that the company is considering a “major acquisition,” and magazine listed Huntsman Corp., Celanese Corp., Lanxess AG and Arkema SA as potential targets.
“I have no idea where they get their reports,” CFO al-Morished said of the MEED report. “We always look for opportunities but the last thing we do is talk about it.”