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Sabic Cuts GE Financing Bond Sale

15 Aug

source: http://www.tradearabia.com/news/newsdetails.asp?Sn=IND&artid=128835

August 14th, 2007

Sabic reduces bond size over credit fear

Saudi Basic Industries Corp. (Sabic) plans to cut a bond sale by almost half to $1.5 billion on concern that global credit fears have hurt investor appetite, two of the arranging banks said on Tuesday.

Sabic, the world’s largest chemical company by market value, had planned to sell about $2.7 billion of bonds to help finance its purchase of the plastics unit of General Electric & Co. for $11.6 billion, agreed in May.

The bonds were going to be sold in two batches; about $2 billion in dollars and $700 million in euros.

The dollar component will now be reduced to $1.5 billion and euro component dropped altogether, said officials at the two banks who declined to be identified.

Citigroup Inc., ABN AMRO, GE Money, JPMorgan Chase & Co. and HSBC Holdings Plc are arranging financing of about $8 billion for the acquisition.

The eight-year dollar bonds will be priced on Monday at a discount, to yield 10.25 percent, an official at one of the banks said.

To compensate for the smaller-than-planned bond sales, state-controlled Sabic will increase to about $6.5 billion the amount it borrows in loans, from about $5.3 billion, one of the officials said.

“It’s been very attractive to banks, across the loans as well as the bonds … but on the bond side it’s missing those investors who would have otherwise come in calmer market conditions,” the official said. Mutlaq al-Morished, Sabic’s chief financial officer, could not immediately be reached for comment.

Credit fears sparked by downgrades of US sub-prime loans — mortgages for people with poor credit histories — have roiled global credit markets in recent weeks, cutting the availability of funds and making borrowing more expensive.

Sabic’s bank loan component will be in three parts; a revolving five-year facility priced at 125 basis points over the London Interbank Offered Rate, a amortising 6.5-year loan at 125 basis points over LIBOR and a seven-year amortising loan at 250 basis points over LIBOR, one of the officials said.

The SABIC bonds are likely to be sold mainly to Middle Eastern investors who prefer dollar-denominated debt, the official said.

Ratings company Standard & Poor’s said on Monday SABIC planned to raise a larger-than-expected $6.65 billion in bank loans. – Reuters

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Posted by on August 15, 2007 in The Business

 

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