Banks sounded on Alba financing

26 July 2002

Regional and international banks are being sounded out over the potential structure and composition of the $1,530 million financing package expected to be raised for the fifth potline of Aluminium Bahrain (Alba).

'There are a number of issues that need to be explored before information memorandums [IMs] will be issued,' says an international banker watching the deal. 'First, it needs to be established whether the banks will bid in groups or individually. If it is the former, the status of the bank groups preliminarily put together last year needs to be established. Second, the availability of different sources of finance for what will almost certainly be a multi-tranche deal needs to be ascertained.' Taylor-DeJonghhas been appointed as financial adviser to Alba (MEED 21:6:02).

Three informal bank groups were formed last year, through there have been some changes to their formations. It is understood that the Citibank, Gulf International Bank, Mizuho Financial Group and National Bank of Bahrain axis has dissolved. The BNP Paribas, HSBC Investment Bank, Barclays Capitaland Bank of Tokyo-Mitsubishialliance is soon to be enlarged by the addition of a regional bank, possibly National Bank of Abu Dhabi, while the third group, comprising Arab Banking Corporation, ANZ Investment Bank, Bank of Bahrain & Kuwait, Deutsche Bankand Sumitomo Mitsui Banking Corporation, is holding together.

Bankers are expecting the package to be carved up into up to four tranches: an export credit facility; a commercial debt facility; an Islamically structured tranche; and a local bond issue. 'The mix is a long way from being decided, but 40:40:10:10 could be the sort of shape arrived at,' says another banker.

The ease with which the commercial facility will be arranged and syndicated could be determined by a decision from the Saudi Arabian Monetary Agency (SAMA - central bank) over whether highly liquid Saudi banks will be allowed to participate in the transaction. Cross-border lending is reviewed on a case-by-case basis by SAMA, though for recent deals applications have been refused more often than they have been granted.

The product of the current sounding process will be seen in the IM, which is scheduled to be issued at the end of the third quarter or the beginning of the fourth quarter. 'The schedule is beginning to look a little tight if the whole transaction is to be completed by the end of the year, as it is supposed to be,' says the second banker. 'We will have to soon start assuming that the deal will be brought to market before Bapco [ Bahrain Petroleum Company].'

Alba is moving ahead with the construction of the expansion, having announced on 23 July the award of the engineering, procurement and construction management (EPCM) contract to the US' Bechtel (see Industry).

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