Saudi Arabia’s SABIC issues $1 bln in two-part bonds as Gulf debt markets pick up

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Saudi Basic Industries Corp (SABIC), the world’s fourth-biggest petrochemicals firm, sold $1 billion in dual-tranche bonds on Thursday, as Gulf debt markets pick up after the summer break.

SABIC sold $500 million of 10-year bonds and $500 million of 30-year Formosa bonds, a document issued by one of the banks leading the deal and seen by Reuters showed.

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Formosa bonds are sold in Taiwan by foreign borrowers and are denominated in currencies other than the Taiwanese dollar.

Governments and corporates in the Gulf have been increasingly tapping debt investors over the past few years to raise cash in an era of low oil prices and low global rates.

Funding needs have intensified this year due to the double economic blow of the COVID-19 pandemic and lower demand for oil, which has weighed on energy prices.

SABIC offered investors 155 basis points over midswaps for the 10-year paper and 3 percent for the 30-year notes, the document showed. It received over $8 billion for the debt offering.

The 30-year bonds were issued at a lower yield than comparable bonds from Saudi oil producer Aramco, which completed its purchase of a 70 percent stake in SABIC for $69.1 billion in June.

“SABIC is less directly exposed to oil and the current high demand in the market and technicals are favorable to longer tenors by investment-grade issuers,” said a Dubai-based fixed income strategist, who did not want to be named.

Aramco and SABIC are both rated A1 by Moody’s and A by Fitch.

SABIC’s bond issuance is one of the largest corporate debt deals in the Middle East this year, following bonds sold by DP World and Equate Petroleum, which raised $1.5 billion and $1.6 billion, respectively.

The deal follows Dubai’s return to the public debt markets this week after six years, and fund managers and bankers expect debt supply from the region to continue over the next few months.

“The recovery in oil price above the $40 level and the improved market sentiment for risky assets have increased demand for emerging market bonds in general and GCC (Gulf Cooperation Council) bonds in particular,” said Raffaele Bertoni, head of debt capital markets at Gulf Investment Corporation.

“I think here in the Gulf ... we’re going to see a lot happening,” a banking source said.

SABIC hired BNP Paribas, Citi, HSBC, Mizuho Securities, MUFG and SMBC Nikko to arrange the deal.

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