Banks await new bond and loan mandates

20 March 1998

Banks are expecting mandates to be awarded for a series of debt issues and loans from the Middle East in March, now that the post-Ramadan lull is over and emerging capital markets have settled to an extent after the turmoil caused by the Asian crisis. Lebanon has just awarded a mandate for a big sovereign debt deal, and arrangers are expected to be picked soon for a Saudi petrochemicals financing.

The Lebanese government announced on 11 March that it had picked France's Banque Paribas to arrange a $500 million, three-year bond issue. The issue comes as part of a government programme to raise $2,000 million over the next two years. Paribas beat eight other banks to the mandate, including leading institutions from the US and Europe. Paribas' Beirut-based manager Nicolas Constantinescu told MEED that Paribas has had a lot of interest from local and foreign investors, despite the fact that ratings agencies Standard & Poor's, Fitch IBCA and Thomson BankWatch have all warned about the size of the budget deficit (see Lebanon).

In the Gulf, both Oman and Qatar have been named as possible sovereign issuers this year. Plans by Oman LNG, the natural gas joint-venture, to issue $500 million worth of bonds, appear to be still on hold. Banking sources say a bond issue from Oman's United Power Company, which was planned for late last year, should go ahead in the middle of the year. The delay partly reflects the deterioration of emerging bond markets at the end of last year and the fact that it is the country's first corporate Eurobond. The size of the issue is understood to be around $150 million.

Japanese banks have largely withdrawn from the syndicated loan market at the moment because of problems at home, which may make the bond market relatively more attractive than bank loans for some borrowers in the Middle East during 1998. The next big financing is likely to be a $700 million loan for the Al-Jubail Petrochemical Company (Kemya). Banks have been waiting since the start of the year for the company, an affiliate of Saudi Basic Industries Corporation (Sabic), to pick an arranging group. 'It could be in the next two weeks, but it's been 'the next two weeks' since Christmas,' said one European banker on 11 March.

There are rumours within Saudi Arabia that the government might opt to finance the Shuaiba power project through an international loan because of delays in creating a legal and regulatory framework for private power projects. However, this would probably mean another sovereign guarantee from the government, which is generally reluctant to do so.

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