The banks pursuing the mandate had expressed concern that the original information memorandum was not sufficiently precise on the nature of the government support for the loan. 'There is now a commitment from the government to meet potential shortfalls,' says an international banker looking closely at the transaction. 'It's not an out-an-out guarantee but most banks will be a lot more comfortable now.'

The composition of the bank groups expected to bid for the mandate has also changed. Originally some four main groups were formed, but jockeying for position has seen one group bolstered and another fall apart. Arab Banking Corporation and Mizuho Financial Group are the newcomers to the group that also includes BNP Paribas, HSBC Investment Bankand Bank of Bahrain & Kuwait. The second group comprises ABN AMRO, Credit Agricole Indosuez, Arab Bankand Sumitomo Mitsui Banking Corporation. The third is made up of Gulf International Bank, National Bank of Bahrainand Arab Petroleum Investments Corporation (Apicorp).

When the bank groups were formed, Citibank- which is also acting as financial adviser to Bapco - was at the forefront of the third group. However, sources close to the deal say that it has failed to gain internal approvals for the group's proposed 12-year bid and the US bank has been forced to withdraw from the group. A Citibank executive declined to comment.

Also open to change is the potential size of the debt package. Originally presented as a $600 million transaction, recent documentation saw the figure raised to $650 million. 'It could end up $100 million lower than this,' says a banker in Bahrain. 'There are some noises that a local-currency bond issue is being considered.' An Islamically structured tranche is also being looked at.

The recent $600 million sovereign borrowing staged by the Kingdom of Bahrain has added a fresh element to the equation (MEED 12:4:02). 'In principle, sucking $600 million out of the potential syndications market for the Bapco deal - and Alba [ Aluminium Bahrain] further down the line - should add to the perceived syndications risk and raise the pricing,' says another international banker eyeing the deal. 'But on the other hand, the sovereign was priced very low for what is a junk rating, and those who are looking at Bapco as being priced at a spread over sovereign Bahrain might see their expectations lowered. It will be very interesting to see just what the banks bid.'

The sovereign loan, which had tenor of 10 years and an average life of about 6.5 years, has a margin of 75 basis points over Libor. Bahrain has a Ba1 rating from US credit rating agency Moody's Investors Service.

'The Bapco pricing will be determined by the structure,' says another banker. 'The larger the ECA [export credit agency] tranche, the more attractive the deal will be to the international market.'

The bidding bank groups will also be eagerly awaiting a decision from the Saudi Arabian Monetary Agency (SAMA - central bank) over whether Saudi banks will be allowed to participate in the transaction. 'If the Saudis are permitted to participate, there is virtually no syndication risk,' says the first banker.