The National Bank of Abu Dhabi (NBAD) is holding fresh talks with financiers in a bid to secure support for the $760m Shadeed Steel project in Oman.

The project is suffering from a poor initial response from banks, as they restrict their lending to key existing clients.

The project is being developed by the UAE’s Al-Ghaith Holdings. NBAD is the financial adviser.

“In the current market, when banks are only doing business on a relationship basis, and this deal is competing with other steel projects in the region, it was always going to be difficult to secure support,” says one banker in the region.

Other financiers are raising concerns over the construction risk.

“There is an additional element of construction risk on the project because it is a sponsor who is new to us and the project is in Oman, while other steel projects in the region are in more favourable markets such as the UAE and Bahrain,” says one Dubai-based project financier. “A year ago, this project would have had no problems raising finance, but now banks are being more selective.”

Initially, NBAD sought a group of up to eight lead arrangers to finance the deal, which was split between a $260m equity portion and a $500m long-term project finance tranche.

NBAD began approaching banks to fund the deal in late June, with the hope of appointing lead arrangers in early August (MEED 4:7:08).

However, this timetable is set to slip because of a lack of firm commitments to the project from banks.

International banks including HSBC, Royal Bank of Scotland, Calyon and Standard Chartered Bank have been approached by NBAD but are understood to have declined to invest in the project.

None of the seven regional banks contacted by MEED say they intend to finance the project, although some are involved in the new round of talks.

Other steel projects include the expansion of Abu Dhabi Basic Industries Corporation (Adbic) plant at Mussafah, and the expansion of the Qatar Steel plant at Mesaieed.

NBAD could not be reached for comment.