Fitch affirms Sabic at 'A+'; Sabic Europe at 'A' on bond exchange offer

The Outlook on the Long-term IDR remains Stable. Fitch has simultaneously affirmed Sabic Europe B.V.'s (Sabic Europe) Long-term IDR at 'A', Short-term IDR at 'F1' and senior unsecured rating at 'A'. The Outlook on the Long-term IDR remains Stable.

The rating actions follow the invitation to holders of Sabic Europe B.V.'s EUR750m 4.5% bonds due 2013, issued in November 2006, to exchange their bond holdings for Euro-denominated 4.5% bonds due 2013 issued by Sabic Capital I BV and guaranteed by Sabic. Based on the draft documentation reviewed by Fitch, the agency believes the transaction would have no credit impact on either Sabic or Sabic Europe's ratings, as the new bonds have similar terms and conditions as the existing bonds, but will be guaranteed by Sabic.

The exchange offer expires on 12 December 2008 with an expected settlement taking place on 19 December 2008, on which date existing bondholders will receive EUR50,000 of the newly-issued bond for each EUR50,000 of the existing bond. For issues delivered for exchange until 5 December 2008, an Early Instruction fee of EUR50 for each EUR50,000 is offered. Bondholders have been invited to vote at a 16 December 2008 meeting on the extraordinary redemption of the existing bonds and the exchange.

Sabic Capital I BV was set up by Sabic as a 100% indirectly-owned subsidiary in September 2008 as part of Sabic's move to centralise its funding activities. The subsidiary is responsible for the financing and tax operations of Sabic's investments in Europe and the USA, following the acquisition of DSM Petrochemicals, GE Plastics, and other entities.

In line with Fitch's parent and subsidiary rating linkage criteria, Sabic Europe is viewed as strongly linked to its parent, Sabic. Notwithstanding the absence of any legal ties, such as guarantees or cross-default clauses, the linkage between Sabic and Sabic Europe is based on robust operational and strategic ties, 100% ownership and demonstrated tangible support. SABIC Europe's rating is thus closely correlated to its parent company's, with a one-notch differential.

Sabic Europe is the European subsidiary of Sabic, a leading global chemicals group headquartered in Saudi Arabia. Sabic acquired Sabic Europe from DSM in 2002. Sabic, which is 70%-owned by the government of Saudi Arabia, is the largest non-oil company in the Middle East. In FY07, the group achieved sales of SR126.2bn and achieved Ebitdar of SR48.2bn. At 9mFY08, Sabic's financial debt net of cash stood at SR43.3bn while Fitch calculates LTM Ebitda at SR57.3bn.