Market Talk: Structured finance needs set to grow

17 December 2020
Ahli Bank of Kuwait’s (ABK) structured finance team is focused on finding innovative solutions for post-Covid growth

Q&A with ABK's Yasmine Salamah, general manager structured finance – Kuwait, and Tom Lind, senior executive officer, DIFC branch, and head of regional corporate finance

Q. What is the significance of structured finance as part of ABK’s wider offering?

During the past years, ABK has proven itself to be a market player in the structured finance field in our core markets of
Kuwait, the UAE and Egypt.

With public-private partnership projects driving the development of infrastructure in Kuwait, ABK has focused on clients that aim to play a key role on projects led by the Kuwait Authority for Partnership Projects (KAPP) and Public Authority for Housing Welfare (PAHW).

By doing so, we became the front-runner in this field in Kuwait and we aim to use this experience to become a lead bank in Egypt, where we are increasingly dealing with government-related entities (GREs) and private sector clients who want to embark on long-term infrastructure investments.

In the UAE, we leveraged our operations at the Dubai International Financial Centre branch, which resulted in ABK acting as initial mandated lead arranger and bookrunner for a number of large regional syndicated facilities.

We have also shown our capabilities as a structuring bank that innovates in the telecom-tower asset-purchase transaction between Zain and IHS, as well as the Umm al-Hayman wastewater project, where we set the blueprint for KAPP and PHAW project financing.

Q. What trends are emerging in the development of structured finance products?

The Covid-19 situation has affected the appetite for corporate risks, resulting in a decline in new syndicated facilities. We are now mostly faced with financing or extending existing transactions.

We envisage that once the authorities have dealt with the initial impact of the pandemic, planning for much-needed infrastructure projects will restart and then our expertise will come into play.

Egypt is the only market that has continued at much the same pace as before, albeit with the credit markets mostly being tapped by GRE entities.

Q. How have the events of 2020 and the disruption to regional markets impacted the structured finance market? 

The economic downturn of prime listed names in the UAE market has dented confidence. Banks are affected by the increase of provisioning, and are closely following the manner in which governments are instructing legislation in relation to delays in repayments due to Covid-19.

Financing based on so-called “predictable” cash-flow prognoses may now be a lot less predictable and therefore a lot more emphasis will be put on security structures and second and third way outs in case of defaults. Additional sureties from government entities and authorities may well be required in the case of long-term infrastructure projects.

Q. Do you see structured finance, either in general or at ABK, moving in a different direction post-Covid?

While the pace of launching new transactions may have slowed down, the need for infrastructure financing and new syndicated loans will re-emerge. Hence while 2020 has been a cautious year for all economies, we believe that 2021 will see banks, corporates and governments adapt to the new reality, leading to the re-kindling of new transactions and delayed project roll-outs.

Evidence of this is the announcements by KAPP and PHAW on their preparation activities for new requests for proposals and the selection of preferred bidders for already tendered projects. 

Q. What are the long-term objectives of ABK in terms of the development of its overall structure finance offering?

This is a long-term plan. Structuring of complex new deals or restructuring of facilities for corporates under duress requires the expertise of financial engineers and our structured finance team at ABK has been exemplary in finding solutions for our clients. We are sure that our track-record will lead to more success in the future.

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