Banks attempt to get involved in Zain deal

20 June 2011

Debt levels of Zain Saudi Arabia worry lenders

Some of the largest lenders to Zain Saudi Arabia (Zain KSA) are petitioning the local Kingdom Holding Company and Bahrain’s Batelco to get involved in the pair’s talks to acquire the Saudi telecoms firm, according to sources close to the deal.

The Saudi banks that have large outstanding loans to Zain KSA are concerned the acquisition will substantially change the basis for the commitments behind the company’s $2.6bn outstanding loan. As a result, they are trying to become involved in the acquisition talks at an early stage to ensure the company’s debt is paid down as a result of the acquisition.

One of the main areas of concern is a commitment by the Saudi telecoms company’s current owner, Kuwait’s Zain Group, to pay any funding shortfall at the Saudi firm. Lenders say a similar commitment from Batelco and Kingdom Holding may not be strong enough for the lenders.

“This deal is only in place because of the Zain Group. If Zain KSA is no longer a part of that, then this facility will have to be repaid or substantially renegotiated,” says one banker involved in the $2.6bn loan.

“We are pushing to be involved in the acquisition discussions from an early stage, because the lenders on the $2.6bn facility won’t allow the same terms to stay in place if Zain KSA comes under new ownership,” says another banker.

Although there is concern about what a potential acquisition will mean for Zain KSA’s debt, some bankers say it is too early to worry about the implications of a deal that may not go ahead. Kingdom Holding and Batelco have only just started due diligence on Zain KSA and have until the end of August to complete the process and decide if they want to proceed with the deal.

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