Kuwait Airways Corporation (KAC) will start assessing bids from banks on 13 November to provide $280 million in financing to cover the airline's acquisition of two Boeing 777-200 aircraft, bankers say.

A KAC official said on 10 November that several banks had shown interest in the financing: he named Sumitomo Bank, Gulf International Bank, Citibank and National Bank of Kuwait (NBK). Bankers in the Gulf say Chase Manhattan Bank is also bidding and Kuwaiti finance house, The International Investor, has offered an Islamic package. Citibank and NBK are understood to be bidding in a group with two other Kuwaiti banks. KAC agreed to buy the planes in July (MEED 12:7:96).

KAC is likely to pick a bidder this month because it wants to make the first payment in December, bankers say. The finance package has two components. The first is pre-delivery finance for the aircraft, one of which is due to arrive in February 1998 and one in June 1998. The second is a 12-year term loan or lease, which will subsume the bridging finance. Bidders are likely to have offered a range of financing options including

leasing arrangements or loans guaranteed by the Export-Import Bank of the US (Eximbank).

The Eximbank route would probably be cheaper for the borrower. One banker estimates that the cost, over the life of the loan, would be around 43 basis points over the London interbank offered rate (Libor), while commercial financing would be likely to come in at least 60 basis points. However, Eximbank financing can be much slower to arrange.

KAC first asked banks to bid for the bridging finance alone, then decided to link it to the term finance to cut borrowing costs and avoid having to pick separate bidders for each. 'Banks maybe don't like putting in an offer for something a year-and-a-half down the line, but they [KAC] did the smart thing,' says a banker.