18 August 2016

Borrower Briefing Bahraini borrowers making a comeback Oman (rated Baa1) has been the growth market in the Gulf for ECA-backed and export loans this year – spearheaded by PDO’s $4 billion jumbo pre-export loan closed at the end of June and Orpic’s $3.8 billion 15-year Liwa Plastics project debt facility signed on 2 March. However, Bahrain - rated Ba2/BB/BB+ after a string of downgrades this year – is also adapting to lower oil income and making a resurgence with both project debt borrowings and corporate liquidity facilities. The growth in borrowing to the market is borne out by the increase in ECA lending across the region (see chart). At the end of June Bahrain Steel returned to the market after a two-year break to refinance a term loan and credit facility. The seven-year deal priced at 340bp over Libor, an increase of 90bp on its previous facility signed in 2014. Aluminium Bahrain (Alba) is also nearing close on a $750 million seven-year loan. Launched to the bank market in June, the deal refinances a 2014 facility and will part fund Alba’s Line 6 expansion project. The loan is being self-arranged by the borrower with financial advisory from JP Morgan, GIB Capital and National Bank of Bahrain. Alba will be raising an additional $3 billion to finance the scheme via bank and ECA loans, and an international bond or sukuk issue. Bank appetite for the Alba debt has been very strong and the final loan will almost certainly be upsized from $750 million. But despite the lender appetite, pricing on the Bahraini deals is, in general, coming in higher than those of similar facilities for Omani borrowers. Margin on the PDO facility was a very competitive 160bp over Libor, while Orpic attracted an all-in price of up to 300bp. Conversely, Alba is expected to price at an allin of 300bp-plus and the Bahrain Steel deal priced at 340bp over Libor, an increase of 90bp on its previous facility signed in 2014. The difference between the two markets, sovereign ratings aside, means that Bahrain remains a potential market for regional lenders which are now looking at a minimum margin of 250-300bp over Libor following an increase on their cost of funding. With Bahrain LNG having recently issued an (RFP) for a 20-year commercial bank/ECA facility to partially fund its $655 million receiving and regasification terminal project in the Hidd industrial area, it will be interesting tosee what difference to the pricing the ECA input will have: Around 80% of the debt is expected to be provided by Kexim and K-Sure on the back of an EPC contract with GS Engineering and Construction.

Mandate mill Stanbic Bank Uganda is rumoured to be approaching lenders for a $50 million three-year club loan to fund its trade-related lending. The deal will replace an $85 million 18-month club loan that Stanbic signed in January 2015. The previous loan was provided by Emirates NBD, Al Ahli Bank of Kuwait, Standard Chartered, Al Khalij Commercial Bank and the Commercial Bank of Qatar. The deal paid a 250bp margin and 90bp in fees. Sponsors of the 344 MW Bridge Power CCGT project in Ghana – Endeavor Energy (60%), Sage Petroleum and General Electric – are planning to bridge finance construction of Phase 1 of the scheme and then go to the DFI and multilateral markets for a long-term funding solution. Financial close is expected by December 2016. Agri-trader and processor Cofco Agri (previously Noble Agri) has sent out a request for proposals for a $2.7 billion dual-tranche refinancing.The deal – which is expected to comprise one- and three-year tranches – will expand and extend a previous one-year $1.7 billion facility signed in September 2015 by Noble Agri. Bahrain LNG WLL – jointly owned by Nogaholding (30%), Teekay LNG Partners (30%), Samsung C&T (20%) and Gulf Investment Corporation (20%) – has issued a request for proposals (RFP) for a 20-year commercial bank/ECA facility to partially fund its $655 million receiving and regasification terminal project in the Hidd industrial area of Bahrain. Responses are due by the end of August.