The preliminary information memorandum (PIM) for the $1,150 million debt financing of the Egyptian LNG (ELNG)gas export project was due to be issued in mid September, says Societe Generale (SG), the financial adviser on the project.
The transaction is expected to be broken into three tranches. The first is a $200 million package offered to the local banking sector. The second slice is a $500 million, uncovered facility offered to the international banking community. The third component will be a $450 million facility provided by the European Investment Bank (EIB - MEED 9:8:02). This third component will be guaranteed by the banks, with EIB taking on the political risk for $225 million worth of the tranche.
'We think there is plenty of dollar liquidity in the local banks,' says SG's Stephen Craen. 'The deal should be particularly attractive to local banks as there is no foreign exchange risk and it gives them the opportunity to place dollars domestically.'
The $500 million tranche to be offered to international banks will have tenor of 15 years. No indications have been made over where the facility will be priced though SG has been keen to stress that previous Egyptian project financings - such as Sidi Krier and Port Said - should not be used as indicators. 'These transactions had exposure to conversion risk, ELNG does not,' says Craen.
Bankers are still assessing whether the perennial problem of withholding taxation will have an impact on the transaction. 'By making this a Law 8 company, most of the problems go away as this exempts the project company from any tax liability,' says an international banker looking at the transaction. 'Though there is still a lingering concern over whether international banks might possibly have some residual liability. However, even if they do, there is no mechanism by which the process would be pursued.'
The schedule for the transaction is beginning to take shape. Banks will be given about a month to consider the PIM and a lead arranging group is expected to be formed by mid November. The size of the group will, in part, be shaped by the desire to reduce syndication risk but this will be balanced by the need to work through a complicated term sheet in good time. Bankers say the middle ground would be a six-to-eight-strong group. The transaction will probably be launched to general syndication in the first quarter of next year, though there is a strong possibility that a sub-underwriting tier might be put in place before the end of December.
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