* Four banks to arrange project sukuk, likely sold next year
- sources
* Part of $12.5 bln debt package for Aramco/Dow petchem JV
* Will be only the second project sukuk from Saudi Arabia
DUBAI, June 12 (Reuters) - Sadara, the $20 billion
petrochemical joint venture between oil giant Saudi Aramco
and Dow Chemical, picked four banks to manage
the Islamic bond, or sukuk, portion of its multi-billion dollar
fundraising, three sources said on Tuesday.
Deutsche Bank, Riyad Bank, Alinma Bank
and Bank Al Bilad have been mandated for the
deal, likely to be denominated in riyals, which will be only the
second project finance sukuk ever to be raised in Saudi Arabia.
Earmarked to raise around $1.4 billion, the sukuk is not
expected to be marketed until next year, two sources said.
It is part of a $12.5 billion debt package currently being
raised to fund the construction of the project, which will
produce more than 3 million tonnes of petrochemicals each year
when completed in 2016.
"The sukuk will take at least nine months to pull together,"
said one banker with knowledge of the matter, speaking on
condition of anonymity as the information isn't public.
"They have appointed the banks as they need to start now.
Getting it registered and approved by the Capital Markets
Authority (the Saudi regulator) takes a long time."
Saudi Aramco wasn't immediately available for comment.
The only project sukuk in Saudi thus far was the 3.75
billion riyals ($1 billion) issue in October from Saudi Aramco
Total Refining and Petrochemical Co (SATORP), a joint venture
between Aramco and France's Total.
However, while initially envisaged to be sold at the same
time as the bank finance was arranged, the SATORP sukuk was
completed more than 15 months after the loans were signed.
This was due to concerns among Islamic scholars about the
sharia-compliance of using an unbuilt asset, not generating any
revenue, as security - Islamic finance is based on the concept
of risk/revenue sharing, with interest payments forbidden.
Such issues won't affect Sadara's sukuk as the SATORP
offering provides a template to work from.
"The structure from SATORP is in place, although there will
be some changes as the (SATORP) structure is quite simple," the
same source said.
As well as the sukuk, commercial loans from Saudi and
international banks and loans from export credit agencies will
be used to raise the $12.5 billion target.
Much of the focus is expected to be placed on Saudi banks to
provide loan funding, as lending by international banks has been
constrained by Europe's sovereign debt crisis and Basel III,
which makes long-term lending more difficult because of capital
requirements on banks.
Saudi banks have ample liquidity and keen to lend to quality
borrowers, although much of their liquidity is in local currency
and not dollars.
Meetings between Aramco, Dow and banks are scheduled to take
place next week, one of the sources said, to discuss the funding
options.
This follows the initial information memorandum being sent
to banks at the end of last month, according to Project Finance
International (PFI), a unit of Thomson Reuters.
Royal Bank of Scotland and Riyad Bank are the
advisors on the project.
($1 = 3.7505 Saudi riyals)
(Additional Reporting by Reem Shamseddine in Khobar; Editing by
Jon Loades-Carter)