Petrochemical giant Saudi Basic Industries Corp (SABIC) is opting for its first private bond placement to raise SR10 billion ($2.67 billion), boosting its finances and funding expansion plans. The firm said on Tuesday it signed an agreement with the Public Investment Fund (PIF) - the finance ministry's investment arm and its biggest shareholder - over the planned issues. PIF holds a 70 percent stake in the world's biggest petrochemicals firm by market value and the remainder is held by private investors. Proceeds from the bonds, which will carry maturities of seven years, will help “raise financing performance, boost competitiveness and contribute to achieve the company's expansion strategy,” SABIC said in a statement on the Saudi bourse website. SABIC Chief Financial Officer Mutlaq Al-Morished said the first issue would take place this month, declining to disclose more details. SABIC raised SR16 billion from the public through three Islamic bond issues over 2006-2008. Morished declined to explain the shift to a private placement to raise the cash. “We don't have any problem with the banks, we are just diversifying the way we finance ourselves,” he told Reuters. SABIC's previous Sukuk issues attracted investors mainly from the region. The company is involved in important expansion plans especially in China and Saudi Arabia. It expects to start production at a plant with China's Sinopec, whose cost rose from an initial $1.7 billion to $3 billion, by the end of this year. “The (bonds) will partially finance (SABIC's) projects as part of its strategic plans and programs linked to raise financing performance, boost competitiveness and contribute to achieve the company's expansion strategy,” it added. SABIC wants to triple its petrochemical production to 130 million tons by 2020 by building plants and acquiring facilities as the company prepares for higher demand for its products. SABIC's bond issue will be the biggest since June when Saudi Electricity Co., the state-controlled power producer, raised SR7 billion by selling five-year Islamic bonds. PIF provides financing for projects that are commercial in nature.
