Saudi Basic Industries Corp. proposed Sukuk-III assigned 'A+' senior unsecured debt rating

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 purchase 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 our standard threshold for subordination. However, we consider that the sukuk holders benefit from diversification in cash flow streams, strong brand recognition, and significant cash holdings at SABIC, and therefore equalize the sukuk rating with that on SABIC.

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 SR140bn ($37.3bn) for the 12 months ended March 31, 2008.