February 6, 2017 / 1:37 PM / 6 months ago

Kuwait's Equate set to issue $750 mln seven-year sukuk - sources

DUBAI, Feb 6 (Reuters) - Kuwait's Equate Petrochemical (IPO-EQUP.KW) will issue a $750 million, seven-year sukuk early next week, company representatives told investors on Sunday during the first of a series of fixed income meetings ahead of the debt sale, sources familiar with the matter told Reuters on Monday.

With the planned sukuk sale, Equate - a joint venture involving Kuwait's Petrochemical Industries Co and Dow Chemical Co - would be the first Gulf Cooperation Council corporate to tap the international debt capital markets this year, after a slow start dominated by issuers in the banking sector.

The new paper, part of a $2 billion sukuk programme, is likely to offer about 180 basis points over midswaps, the sources said, adding that the pricing would be very much in line with the company's existing debt curve.

Telephone calls to Equate's headquarters in Kuwait seeking comment were not answered.

Equate presented a "good story" to investors in Abu Dhabi and Dubai on Feb. 5, fund managers said. Roadshow meetings will continue in London on Feb. 6 and 7, Hong Kong on Feb. 9, Singapore on Feb. 10 and Kuwait City on Feb. 12.

"Generally in the sukuk space having a corporate coming up with a sizeable deal is quite rare, so it's a deal which is going to gather significant attention," said one fixed income portfolio manager.

"It's a company with a good rating and existing debt which is trading well. So you're basically dealing almost with a high- grade sukuk." Equate is rated Baa2 by Moody's and BBB+ by Standard & Poor's.

The sukuk proceeds will be used to refinance existing debt as the company aims to maintain its net debt to EBITDA ratio, which is currently 2.9 times, said the sources. The fact that the proceeds will not be used for additional leverage gives further support to Equate's story, they added.

A single, seven-year tranche looks likely to sit well with sukuk investors, who are normally cautious when it comes to longer maturities.

Equate issued its debut conventional bonds in November last year, raising a total of $2.25 billion split into a long five-year bond maturing in March 2022 and a 10-year tranche. The 2022s were trading at 169.4 basis points over midswaps on Monday while the 2026s were trading at around 210 bps over, Thomson Reuters data showed.

The planned sukuk will be arranged by Citi, HSBC, JP Morgan, KFH Capital and NBK Capital as global coordinators and bookrunners, with Mizuho, MUFG, National Bank of Abu Dhabi and SMBC Nikko joining as joint bookrunners. (Editing by Andrew Torchia)

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