The refinancing of the $1,200 million petrochemicals finance package for the Equate project will begin in the first week of September, according to Citibank, one of the banks that arranged the original loan. Citibank confirms that the interest margin on Equate's debt will be halved by the refinancing to 80 basis points over Libor.

'It'll be in the market this week,' Citibank global project finance director Sikander Zaman told MEED on 2 September. 'The tenor will be extended by one year on average and the margin will come down to 80 basis points.' Equate, a joint venture between Union Carbide of the US and two Kuwaiti companies, is building a petro-chemicals plant in Kuwait. The arranging group for the financing included Chase Manhattan and JP Morgan, Gulf Investment Corporation, Gulf International Bank and National Bank of Kuwait (MEED 8:8:97).

The refinancing will have essentially the same structure as the original loan, with a 101/2-year, $500 million tranche under-written by Kuwaiti banks and an eight-and-a-half-year, $700 million international tranche.

Zaman says that Equate originally wanted the repayment period for the whole loan to average 10 years. The Kuwaiti banks were willing to do this, but the international banks balked at such a long tenor. At the time, Equate was one of the first projects of its kind in the Gulf to be financed commercially, without sovereign or export credit agency guarantees.

Since then, the concept of limited or non-recourse project finance in the Gulf has become more established and lending margins in general have fallen (see Special Report, page 27).