Emirates Aluminium (Emal) will close a $3.4bn commercial bank loan in late March, part of which it plans to repay with a bond issue now set to take place in late 2013.

Abu Dhabi’s government-owned investment vehicle Mubadala Development Company, one of the sponsors of the scheme, had hoped to complete a project bond of about $1.25bn to help fund the second phase of Emal. It has been unable to do so, and because of complications related to its accounting period, the bond will now have to be delayed until around October.

The news has raised some concern among the 22-member bank group, which will now have to provide a larger financing to act as a bridge loan until the bond issue is completed.

Emal phase 2 funding ($m)
Conventional bank tranche 2,925
Islamic bank tranche 475
Export credit agencies 600
Equity  600
Total project cost 4,600
*=Before bond issue. Source: MEED

“We all piled into this deal based on there being a bond issue so they wouldn’t need our full commitments,” says one banker lending to the project, “Now although they say the bond issue is still planned, it all really depends on market conditions.”

Although Emal was originally seeking $2.25bn for the bank tranche of the $4.6bn it needs to fund its phase two expansion, banks offered far more loans than it needed. But this was based on the assumption that a bond issue would be done and not all of those loans would be utilised by the sponsors.

“There is still every intention to do a bond issue, but the plan now is to close all the other facilities with a slightly larger bank tranche, which is then scaled back later in the year when the bond is done,” says one source close to the project.

Some banks have had their commitment levels reduced during discussions with the project sponsors, Mubadala and Dubai Aluminium, over the past few weeks. Several banks say they are still keen for their loans to the project to be reduced further in size, and would like to see the bond issue happen before the end of the year.