Saudi Aramco Total Refining and Petrochemical Company (SATORP), a joint venture between Saudi Aramco and Total of France, issued its debut Sukuk on the 9th October 2011. The combined value of the Sukuk issuance is SAR3.75 billion (US$1 billion) and received subscription orders in excess of SAR13 billion (US$3.45 billion). The Satorp Sukuk represents the first Shariah compliant project Sukuk instrument in Saudi Arabia and underpins growing demand for Islamic financing facilities by Saudi corporates.
The Saudi Capital Market Authority (CMA) approved the public offering of the Sukuk certificates in August this year by Arabian Aramco Total Services Company, the special purpose company which is issuing the Sukuk certificates on behalf of Satorp.
The Sukuk issue was originally scheduled in 2009, but difficulties in its Shariah structuring caused a postponement.
According to Samba Capital & Investment Management Company, the final pricing on Satorp’s public offering of the Saudi riyal-denominated Sukuk certificates has been set at a six-month SAIBOR plus a margin of 95 basis points per annum.
This pricing is exceptionally tight given that the yield for the SAR1.8 billion (US$480 million) Sukuk Mudarabah issued by Saudi International Petrochemical Company (Sipchem) in June last year was SAIBOR plus 1.75% per year. Despite this, the Sukuk was still heavily oversubscribed by 3.5 times.
The offering, sale and delivery of the 14 year SAR3.75 billion Sukuk, which matures in 2025, is limited solely to Saudi nationals and those other legal persons with a permanent establishment in the kingdom.
The Sukuk issuance received strong interest from financial institutions, mutual funds, insurance companies and pension funds as well as certain high net worth individuals.
The structure of the issuance is based on a Musharakah structure and also involves a forward lease agreement. The issuer, Arabian Aramco Total Services Company and Satorp are partners under the Musharakah agreement and also co-lessors under the forward lease agreement. Satorp is also the managing partner under the Musharakah agreement and the lessee under the forward lease agreement.
As such the Satorp Sukuk represents only a small proportion of the total financing required for the entire project. In October 2010, Satorp closed a multi-source US$8.5 billion 16-year financing for the Jubail refinery project including US$4 billion from the Saudi public investment fund and export credit agencies and US$4.5 billion in private placements from various commercial financial institutions.
The financing facilities include dual-currency (US dollar and Saudi riyal) commercial loans; dual-currency Islamic financing facilities; export credit facilities provided by seven export credit agencies and local developmental agencies. The Islamic finance facilities were lead arranged by Al-Rajhi Bank; Alinma Bank; the Islamic Development Bank and Bank AlJazira. The state-of-the-art SATORP’s refinery is scheduled to be commissioned sometime in 2013 and is part of Saudi Aramco’s strategy to boost Saudi Arabia’s refining capacity.