Banks given more time for Yanbu financing

17 March 2010

Potential lenders say a further extension will be necessary

The deadline for banks to give their responses to requests to finance the $10bn Yanbu refinery in Saudi Arabia has been put back to 19 March, with potential lenders saying a further extension will be necessary.

Banks have already been granted an extension from the original deadline of 13 March, but many say they still do not have enough time to get internal approvals for new large loans to the project.

Expected Jubail financing breakdown($ bn)
International banks commercial loan1.7
Saudi Banks ($ tranche)0.79
Saudi Industrial Development Fund0.53
Public Investment Fund1.3
Export Credit Agency covered loans *1.7
Saudi banks (SR tranche) *2
Sukuk *1
* sizes not yet finalised. SR = Saudi Riyal. Source: MEED 

“There is simply not enough time to get approvals from our credit committee. After the financial crisis, it is taking a lot longer for new loans to be approved,” says a project finance banker at an international bank.

A Riyadh-based banker adds, “We are unlikely to get approvals in place by the 19 March, and I’m sure some banks will need at least until the end of March.”

Banks have been given very little time to evaluate funding the scheme, with the financing invitations for the Yanbu project only having been sent out in early February.

The funding will be used by a joint venture of Saudi Aramco and the US’ ConocoPhillips to develop the 400,000 barrels a day export refinery.

Aramco and its financial advisers, the US’ Citigroup and Riyad Bank, had hoped to be able to close the financing for the Yanbu scheme quickly despite its size, because they were already familiar with another Aramco project, the Jubail refinery, being developed with France’s Total.

Saudi banks have now received allocations for the US dollar loans to the Jubail project, but are still waiting to be informed how much they will be expected to commit in riyals.

In total, the Saudi banks are committing about $790m. Pricing on this tranche of the debt is 135 basis points above the London interbank offered rate, including the margin and fees. International banks are also still waiting to be informed of their allocations to the export credit agency (ECA) guaranteed tranche of debt for the project.

Bankers close to the project say that once the ECA allocations have been finalised, it will be followed by a local sukuk issue of about $1bn. The Saudi riyal tranche will then make up the remainder of the financing required for the $9.6bn Jubail project. International banks were informed in early March that their allocations to a commercial loan for Jubail had been scaled back, bringing their total to $1.7bn.

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