Banks eye Alba debt two-step

15 October 2001

Regional and international banks are preparing to draw up a two-stage plan to meet the financing needs of Aluminium Bahrain (Alba). The first facility is expected to be a $107 million, five-year commercial borrowing, and this will be followed later by an anticipated $1,530 million facility.

The smaller loan will be used to refinance a $100 million bond issued by Alba in 1994 (MEED 28:10:94). The seven-year paper matures at the end of October and Alba has decided to refinance it with five-year commercial debt.

'Not only will they probably get it cheaper, but they will be able to use it as a sighter for the expansion financing which is going to come later,' says an interested banker.

It is understood that Arab Banking Corporation (ABC), Bank of Bahrain & Kuwait (BBK), BNP Paribas, Citibank, Gulf International Bank (GIB)and HSBCare among the banks looking at the transaction.

'Where the refinancing gets priced will be interesting,' says another banker close to the transaction. 'International banks will not want to go much lower than 70 bp [basis points over Libor], but the local and regional banks might get aggressive and go down to 60-65 bp.'

Most banks will be looking ahead to the debt package needed for the part-financing of Alba's recently approved expansion project. The 250,000-tonne-a-year fifth potline will need about $1,530 million of debt finance, which is expected to include a blend of commercial and export credits.

Banks have begun the process of forming loose groups that might later bid for the lead arranging mandate. Banking sources say that one group is forming around ABC, ANZ Investment Bankand Deutsche Bank, another around GIB, Citibank, Industrial Bank of Japanand National Bank of Bahrain, and a third along a BNP Paribas, HSBC, BBK axis.

No clear timeframe has been drawn up for how Alba's expansion financing will progress, but bankers are still expecting the debt financing for the refurbishment of the refinery operated by Bahrain Petroleum Company (Bapco)to come to market first (MEED 5:10:01, Industry).

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