RIYADH: Saudi International Petrochemical Co. (Sipchem) expects to raise up to SR2 billion ($533.3 million) from a planned Islamic bond offering to fund plant expansions, its chief executive said. Sipchem, which plans to part-finance three projects worth over $1 billion with the Sukuk sale, began roadshows for the bond on Saturday and sees book building to begin next week. "We target raising SR1.5 billion from the issue and the value may rise to SR2 billion based on our need and on the offers (from investors)," chief executive Ahmad Al-Ohaly told Reuters. "So far it is 1.5 billion riyals as a base case," he said. Roadshows for the local currency Sukuk will last 10 working days and the Sukuk will be registered in denominations of SR100,000 ($26,000), subject to a minimum initial subscription amount of SR1 million. The three projects include building a chemical plant in partnership with South Korea's Hanwha Chemical, an ethyl acetate plant fully-owned by Sipchem and a 50-50 joint venture with a Korean firm to build a wiring cable compounding material plant, Al-Ohaly said. All the three projects will start production in mid-2013, he added. The total cost of these projects exceeds $1 billion and will be partly financed from Sukuk and through self-financing and loans, the CEO said, adding that the issue would be enough to cover the needed financing. Sipchem expects strong growth in 2013 when the plants become operational, the CEO said. Deutsche Securities, the securities arm of Deutsche Bank, and Riyad Capital were appointed as joint lead managers for the sukuk. Under a Mudaraba Sukuk, a bank provides capital for a project while an entrepreneur manages the deal. The profits are split according to a pre-determined ratio and the bank bears any monetary losses that arise. "This week we are offering the bonds to investors, book building process will begin next week … we received strong response from big financial institutions," Al-Ohaly said. Government-owned institutions like Public Pension Agency, General Organization for Social Insurance and Human Resources Development Fund have expressed interest in the Sukuk, he said.
