Marafiq sets tough pricing on $667m loan

08 June 2010

Utility company looking to raise 15-year corporate loan

Power & Water Utility Company for Jubail & Yanbu (Marafiq) has priced a SR2.5bn ($667m) loan at under 100 basis points above the Saudi interbank offered rate (Sibor) after just three local banks said they would fund the entire deal.

Marafiq has priced the deal at 85 basis points above Sibor for the first five years, rising to 115 basis points above Sibor for the next five years, and 140 basis points above Sibor for the final five years. The deal also pays an arranging fee of 1.5 per cent. Several banks have declined to be involved in the deal because of the tight pricing.

Three banks, however, are understood to have said they can fund the loan, Banque Saudi Fransi, National Commercial Bank and Marafiq’s financial adviser Samba. Discussions are continuing though as Marafiq attempts to expand its lending group to include a further three banks. “No banks have been formally chosen yet, and there is still a chance for other lenders to confirm their involvement,” says a source close to the deal.

Marafiq and its advisers met at the beginning of June to assess the funding offers made by Saudi banks, and contacted potential lenders with the pricing information shortly afterwards. Banks have been given until 9 June to say if they want to be involved in the deal.

In addition to the low pricing, some banks have reservations about making a 15-year corporate loan. The banks involved in the deal take comfort from Marafiq being backed by state giants like Saudi Aramco and Saudi Arabian Basic Industries Corporation (Sabic) and stable revenues.

One source in Riyadh says, “Banks in Saudi Arabia are desperate to book assets, and the pricing on this loan shows how low some of them are prepared to go in order to get new deals.”

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