Mumtalakat set to finalise $500m loan

24 February 2010

Bahrain sovereign wealth fund leads talks with banks

Bahrain sovereign wealth fund Mumtalakat is close to finalising the details of a new $500m loan, with discussions based on a price of about 200 to 250 basis points above the London interbank offered rate (Libor).

Mumtalakat hopes to have agreed the final details of the pricing in early March and to have completed the financing by the end of that month. The talks with potential lenders began in mid-January.

Mumtalakat has not appointed a bank to run the deal and is instead leading the talks with banks itself.

Although a number of banks are understood to have been deterred by the relatively low pricing involved, there are enough banks involved in the talks to ensure the deal will be fully funded, according to sources close to the discussions.

One banker says the final pricing on the loan is likely to be at the upper end of the pricing range, based on the current market trading for the Bahrain sovereign Islamic bond (sukuk). The credit default swaps on that sukuk are currently trading at about 200 basis points, and the Mumtalakat deal will probably be priced slightly higher than that.

The $500m loan deal has a three-year tenor and is expected to be used as bridging finance ahead of a bond issue. (MEED 31:1:10).

Mumtalakat’s last loan deal was a $500m, five-year loan that was issued in August 2008 and was priced at 130 basis points above Libor. Eight banks were involved in financing that deal.

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