Linklaters has advised (as international legal counsel) Deutsche Securities Saudi Arabia, Samba Capital & Investment Management Company and Saudi Fransi Capital as joint lead managers and joint bookrunners on the issuance of Saudi Riyal 3.749bn (approximately U.S.$1bn) sukuk certificates by Arabian Aramco Total Services Company (AATSC). The transaction represents the first ever Sharia compliant “greenfield” project bond (sukuk). The sukuk certificates are listed on the Saudi Stock Exchange (Tadawul).
The sukuk transaction forms part of the wider multi-source financing for a 400,000 barrel per day refinery and petrochemical project at the Jubail Industrial City in Saudi Arabia, which has an estimated construction cost of over U.S.$14bn. The existing project financing documentation (on which Linklaters also advised the diverse lender group) was signed in June 2010 and provides for approximately U.S.$8.5bn of senior debt to be raised by Saudi Aramco Total Petrochemical and Refining Company (SATORP), a joint venture company established by project sponsors Saudi Aramco and TOTAL S.A.
A key challenge faced on the transaction was to integrate the innovative and complex Sharia sukuk structure into multi-source conventional financing arrangements and negotiating (and meeting) a stringent set of sukuk accession criteria to preserve the pari passu position of the senior debt. The sukuk transaction was also the first time a previously unlisted company has listed sukuk (rather than equity) on Tadawul and the first time that the issuer was a special purpose vehicle.
Linklaters’ Islamic finance capability was also instrumental in obtaining a Sharia pronouncement (fatwa) for the sukuk transaction by two leading Islamic financial institutions in Saudi Arabia, Al Inma Investment Company and Bank AlBilad. Their respective Sharia committees include a number of the most highly regarded Islamic scholars in the MENA region and this is the first sukuk transaction in Saudi Arabia to receive such a high profile Sharia endorsement. Sharia pronouncements were also issued by the respective Sharia committees of Deutsche Securities Saudi Arabia, Samba Capital & Investment Management Company and Saudi Fransi Capital.
The Linklaters team was led by partner Richard O’Callaghan and managing associate Mark Jones in Dubai and partner Julian Davies and managing associate Adam Fogarty in London.
Richard commented: “This is a very significant transaction for the capital markets in Saudi Arabia and the wider region and marks an important step forward in the evolution of the onshore “debt” capital markets in Saudi Arabia and, more generally, the diversity of potential funding sources available to major infrastructure projects. We also hope that it will encourage other unlisted companies in the Kingdom to access the local capital markets.”
Julian also noted that: “it is a fantastic achievement for everyone involved to close the first greenfield sukuk project bond. The combination of the latest “international standard” project bond intercreditor techniques with an innovative Islamic finance sukuk structure in the context of a greenfield project financing is an important development for project finance and the capital markets going forward”.
The accession of the sukuk to the wider financing also involved the Linklaters team advising the wider lender group and intercreditor agent led by partner Manzer Ijaz and managing associates Tessa Davis and James McLaren in London.
Other key members of the Linklaters team included associate Jack Nichols in Dubai and US associates Varsha Trottman and Nick Cook in London.
Meshal Al Akeel Law Firm (in affiliation with Hourani & Associates) acted as local legal counsel to the joint lead managers and joint bookrunners.
Also advising was Allen & Overy LLP (as international legal counsel to AATSC, SATORP and the sponsors) and Abdulaziz AlGasim Law Firm in association with Allen & Overy LLP (as local legal counsel to AATSC, SATORP and the sponsors).
