Saudi Basic Industries Corp. two Sukuk totaling SR11bn assigned 'A+' issue ratings

In conjunction with the release of ratings on these sukuk, Standard & Poor's also assigned its 'A+/A-1' long and short-term local currency corporate credit ratings to SABIC. The outlook is stable.

Under an asset transfer agreement, SABIC has transferred certain rights and obligations for specific marketing agreements, which represent the sukuk assets of SABIC Sukuk LLC, a 100% subsidiary of SABIC. SABIC Sukuk LLC will hold these assets as a custodian for the benefit of the sukuk holders. The sukuk assets are expected to generate the necessary cash flows to cover periodic payments to the sukuk holders. SABIC will be required to repurchase the sukuk from the sukuk holders when they exercise their right to require SABIC to redeem their sukuk.

According to our criteria, we equalize the issue rating with that of the corporate credit rating on the issuer, SABIC.

Given a significant amount of debt at subsidiary level, most of which is outside Saudi Arabia, the amount of subsidiary debt in relation to total assets exceeds Standard & Poor's standard threshold for subordination. "However, we consider the sukuk holders benefit from diversification in cash flow streams, strong brand recognition, and significant cash holdings at SABIC, and therefore equalize the sukuk ratings with that on SABIC," said Standard & Poor's credit analyst Tobias Mock.

The corporate credit ratings on SABIC reflect its leading market and cost position in basic and commodity chemicals as the world's second-largest producer of ethylene and No. 3 producer of polyethylene. SABIC is also the Gulf region's largest steel producer with a current capacity in excess of five million metric tons (mmt). SABIC had sales of SR126bn ($33.6bn) for the 12 months ended Dec. 31, 2007.