Banks warn delays to Jubail allocation will hit Yanbu deal

24 February 2010

Bankers yet to hold final financing allocations for Jubail refinery

Banks involved in a deal to finance the $10bn Jubail refinery project in Saudi Arabia say they are still waiting to find out how much funding they will need to provide.

The delay in making allocations on the Jubail project has left banks uncertain how they will proceed with another major refinery project planned by Saudi Aramco, the Yanbu refinery, which is expected to require a similar amount of financing.

Jubail key dates

June 2009 - Financing launched to banks

November 2009 - Initial debt pricing revealed

November 2009 -Banque Saudi Fransi, Samba and Deutsche Bank appointed to run local sukuk issue

March 2010 - Roadshow for sukuk due to start

Source: MEED

Bankers say that unless the Jubail allocations are made soon, they will struggle to meet the deadline for responses to the Yanbu financing of 13 March.

“We don’t really know what the hold-up is with Jubail,” says one Saudi banker. “And now that the Yanbu financing has been launched at the same time, it is becoming quite a complicated process.”

Bankers say they had expected to be informed of their final allocations for the Jubail project before the end of 2009, shortly after pricing levels on the debt were agreed (MEED 30:11:09).

In contrast to Jubail, the information sent to banks in early February about the Yanbu refinery financing contains few details about the breakdown of the debt.

“The size of each tranche for the Jubail debt has been adjusted so much to get the best overall pricing on the deal, that I think on Yanbu they are being more open to see how much is offered in each currency before formulating the tranches,” says the head of project finance at a bank in Saudi Arabia.

The Jubail project, a joint venture with France’s Total, was launched to the bank market in June 2009 and the sponsors hoped to complete the deal by the end of 2009. However, as well as the delay on deciding final allocations for each bank, a $1bn Islamic bond (sukuk) has also yet to be issued. Bankers in Saudi Arabia say a roadshow for the sukuk could begin by the end of March.

In late 2009, Calyon’s local affiliate Banque Saudi Fransi, together with local bank Samba and Germany’s Deutsche Bank were appointed to run the sukuk issue (MEED 18:12:09).

The US’ Citigroup and the local Riyad Bank are acting as financial advisers on the Yanbu refinery.

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