Banks hang on South Hook

28 November 2004
Qatar Liquefied Gas Company II (Qatargas II)was close to finalising the composition of an expected 10-strong club of mandated lead arrangers (MLAs) for the commercial debt financing on its regassification terminal at South Hook, on the UK's Welsh coast, as MEED went press.
Qatar Liquefied Gas Company II (Qatargas II)was close to finalising the composition of an expected 10-strong club of mandated lead arrangers (MLAs) for the commercial debt financing on its regassification terminal at South Hook, on the UK's Welsh coast, as MEED went press.

The 25-year facility was increased in size to £430 million ($803 million), from the original £387 million ($722 million) following the submission of marginally higher than expected bids for the project's engineering, procurement and construction (EPC) contract.

Banks looking at the transaction are expecting the pre-completion margin to be about 40 basis points (bp) over Libor. The post-completion margin is expected to start at 65 bp before rising to 75 bp at year 11, then to 90 bp for years 16-20 and 105 bp for years 21-25.

The deal is expected to be structured as a club, but there may be a limited general syndication after financial close, which is scheduled to be staged in the first two weeks of December.

The South Hook facilities were originally to be financed with a 25-year, sterling-denominated bond, for which Royal Bank of Scotland (RBS)and UBS had been awarded lead manager mandates. It is understood that a surfeit of unsolicited offers for commercial debt at competitive prices provoked a change of strategy and the reversion to project finance. However, the economics of the regassification project had been built around 25-year debt - with an average life of 17.5 years - and the exceptionally long tenor was transferred to the commercial borrowing.

Progress has also been made on the financing for Qatargas' two liquefaction trains at Ras Laffan. The US' Export-Import Bank has signalled the availability of up to $930 million of export credits and Italy's Sace is understood to have indicated approvals for up to $795 million worth of credit. The final mix of the multi-tranche financing for the trains will be determined after the award of the main EPC contract, which is expected in early December. With long-lead items being sourced from both the US and Italy, both agencies will be involved, but the total call on export credits is not expected to exceed $1,000 million. The commercial debt tranche - for which a total of $3,600 million has been committed - will be scaled back accordingly.

RBS is acting as Qatargas II's financial adviser.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications