DMEA: Money matters in Saudi
Two significant Saudi Arabian financial deals came to the fore this week centring on petrochemicals and pipelines.
Saudi Aramco and Dow Chemical reached a debt restructuring agreement for their Sadara Chemical Co. joint venture (JV) while allocating more gas to the plant. The deal will see the partners guarantee up to an aggregate of $3.7bn of senior debt proportionate to their shareholding while benefiting from a repayment grace period that runs until June 2026.
The JV operates a $20bn plant in Jubail Industrial City in the oil-rich Eastern Province, capable of producing 3mn tonnes per year (tpy) of a slate of 26 chemicals and is home to Saudi Arabia’s first mixed-feedstock cracker. Commercial operations began in 2017.
Meanwhile, Aramco is also reported to have asked banks for proposals to provide funding that it intends to offer companies considering leasing a stake in its oil pipelines division.
The financing could be worth up to $10bn, putting it on a par with the $10.1bn Abu Dhabi National Oil Co. (ADNOC) received from a consortium in June 2020 in exchange for leasing out a 49% share in the ADNOC Gas Pipelines and significantly more than the $4.9bn BlackRock and KKR spent to lease a 40% stake in ADNOC Oil Pipelines months earlier.
Aramco is being advised by JPMorgan and Japan’s MUFG on the novel deal, dubbed internally ‘Project Seek’, which would see the company provide financing to buyers to fund the lease the stake in the pipeline business.