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Sabic CFO Sees Perfect Timing for Second Debt Sale This Year

Sabic headquarters in Riyadh
The Saudi Basic Industries Corp. headquarters stands in Riyadh. Photographer: Mido Ahmed/AFP/Getty Images

Saudi Basic Industries Corp., the world’s second-biggest chemicals maker, is planning a second foreign-currency bond sale this year as it seeks to refinance debt amid lower interest rates.

The state-controlled company will sell euro-denominated securities before the end of this year although it hasn’t decided how much money it will raise, Chief Financial Officer Mutlaq al-Morished told reporters in Riyadh yesterday. “It’s excellent timing for anybody to refinance.”

Sabic, as the company is known, last month raised $1 billion from five-year notes in its first dollar-bond deal since 2010, according to data compiled by Bloomberg. The securities pay a coupon of 2.625 percent and were priced to yield 130 basis points over similar maturity U.S. Treasury securities. Orders exceeded the issue’s size by more than five times, two people familiar with the sale said at the time.

Issuers from the six-nation Gulf Cooperation Council, which includes Saudi Arabia and Qatar, are seeking to benefit from lower borrowing costs before the Federal Reserve reduces monetary stimulus. The yield on 10-year U.S. Treasuries has declined 48 basis points from its September peak after the U.S. central bank surprised investors last month by maintaining its bond-buying program.

Euro Diversification

Sabic’s preference for a euro-denominated issue will “enable a greater diversification in Sabic’s debt financing,” Montasser Khelifi, a Dubai-based senior manager for global markets at Quantum Investment Bank Ltd., said in an e-mail. “The recovery in the euro zone is not as strong as in the U.S., so the European Central Bank is more committed to lower rates than the Fed.”

ECB President Mario Draghi has vowed to hold borrowing costs low for an extended period. Fed policy makers, who meet again this week, will pare the monthly pace of asset buying to $70 billion at their March 18-19 meeting, according to the median of 40 responses in a Bloomberg News survey of economists.

Sabic, which has Moody’s Investors Service’s fifth-highest investment grade of A1, has $12.5 billion of debt outstanding, according to data compiled by Bloomberg. Of that $1 billion is due this year and $1.9 billion next year.

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