Saudi Aramco-Dow Venture to Pay 1.25% Over Libor on Loans

Sadara Chemical Co., the Saudi Arabian company that raised $10.5 billion in the biggest petrochemicals financing deal this week, will pay initial interest of 125 basis points over the benchmark rate 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., 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 climb to 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 the Jubail Industrial City 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 in Jubail.

Biggest Complex

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 declined to comment saying deal details were confidential.

Project finance loans in the Middle East and Africa are set to rise almost 15 percent to about $40 billion this year, Ravi Suri, Standard Chartered Plc’s head of regional project finance, said in January. Lending would be driven by investments in roads, power, desalination and petrochemicals plants, he said

Emirates Aluminium Co., which is building the world’s biggest aluminum smelter in the United Arab Emirates, arranged a $3.4 billion loan in April to fund expansion, a banker familiar with the deal said that month. Pricing for the 15.5-year loan begins at 250 basis points above Libor and increases over the term of the loan to a peak of 325 basis points above the benchmark, according to the banker.

Qatar Petroleum in 2011 agreed to pay an interest rate of 2.19 percentage points over Libor for $3.34 billion in bank loans to finance its Barzan natural-gas project, Finance Director Abdul Rahman Al Sheebi said that year.

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