Bankers claim Yanbu refinery financing oversubscribed

23 March 2010

Sponsors aim to complete financing for $9bn-plus scheme in first half of 2010

Commercial loans for the $9bn-plus Yanbu refinery project being sponsored by state energy giant Saudi Aramco and the US’ ConocoPhillips are oversubscribed, according to bankers close to the deal.

The deadline for banks to respond to the request for proposals to finance the scheme was 19 March. Details of the size of the various loans which will be used to finance the project have not yet been disclosed but will be easily met, sources close to the scheme tell MEED.

“The Saudi riyal and dollar tranches are significantly oversubscribed already, so all the money is there for the project loans,” a source close to the scheme says.

The over-subscription echoes that of Aramco’s last major project financing, on the similarly sized Jubail refinery, and comes despite expectations that banks would need a second extension of the deadline for responses.

One banker in Saudi Arabia says that local banks have submitted indications of what they can commit to the project, with these loans subject to board approval, rather than seeking another deadline extension while they approach their boards.

The financial advisers on the project, the US’ Citigroup and the local Riyadh Bank, are also currently looking at proposals from banks to arrange a bond issue to help finance the project. It is likely to be at least $1bn in size.

“Proposals for a bond issue have been made and there is the opportunity to do both an international bond issue and a domestic issue,” says the source close to the scheme.

Talks are also still under way with at least seven export credit agencies (ECAs), although which of these finally agree to make loans or loan guarantees will depend on the procurement strategy of the project. ECAs typically only finance projects, which involve exports or imports from their home nation.

The sponsors of the Yanbu refinery are hoping to complete the financing of the project before August. However, with several parts of the Jubail deal still to be finalised, including the Saudi riyal denominated loans and the export credit agency tranches, this could be an ambitious timescale.

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