Despite speculation that strong interest in the transaction would lead to it being conducted on a club basis, QGTL’s shareholders, Qatar Petroleum (QP)and South Africa’s Sasol, have determined that it go to syndication. Arab Petroleum Investments Corporation (Apicorp)and Gulf International Bank (GIB)have been appointed joint regional bookrunners. Credit Agricole Indosuezhas won the international bookrunner mandate. The lead arrangers are underwriting the transaction on a pro-rata basis, with $46.7 million each: they were asked to bid for $50 million final hold tickets (MEED 18:10:02).
‘The syndication, when it comes, should be pretty straightforward business,’ says one of the lead arrangers. ‘As the 15 lead arrangers are already under their hold targets, it’s very comfortable: if only all regional deals were as well thought out as this. QP and RBS [ Royal Bank of Scotland– the financial advisers on the deal] have done very well.’
Documentation is due to be completed in mid-December, and signing will take place in January to coincide with the award of the engineering, procurement and construction (EPC) package. General syndication will be launched immediately after the signing.
Other specific bank roles on the deal include HSBC Investment Bank acting as the security trustee, Mizuho Financial Group as the pre-financial close insurance bank, KBC (Ireland)as the pre-financial close technical bank and BNP Paribasas the documentation and facility agent.
The facility has a door-to-door tenor of 14 years, though the average life will depend on how the repayment schedule unfolds: in the ‘best-case’ scenario, the average life will be about 10 years; if conditions are not ideal, it will be about 12 years, bankers say. This approach was used on the $750 million loan secured by Qatar Chemical Company (Q-Chem)in 1999.
The package has a balloon mechanism that will range from 15-25 per cent depending on the path taken by the repayment schedule. Bankers say the facility is competitively priced, with pricing coming in under the Q-Chem borrowing. It has a step-up structure, carrying a margin of 75 basis points (bp) until completion, rising to 115 bp for the next three years, then to 135 bp for the following three years, before rising to 150 bp for the final four years.
‘The way the deal is structured suggests that sponsors will be likely to refinance before year eight,’ says one of the lead arrangers. ‘At that point there is a clause ensuring 50 per cent of the distributable cash is used to prepay the balloon. At year 11, 100 per cent of the distributable cash will be used for prepayment. So, if the project sponsors want any dividends, they will be wanting to have refinanced before year eight and certainly before year 11.’
Bankers say the QGTL transaction has been particularly well received as it is the first financing for a world-scale gas-to-liquids (GTL) project in the world, and a number of financial institutions have been keen to gain experience in the sector. There is a strong possibility that the facility will be deployed again soon, with two other GTL projects well advanced in Qatar, one involving ExxonMobilCorporationof the US and the other with the Royal/Dutch Shell Group.