A final decision will be taken by Qalhat LNG (QLNG)on 29 November on the composition of the mandated lead arranger group (MLA) for its $648 million commercial debt tranche.

It is understood that the frontrunners for the mandate are Banca Intesa, BNP Paribas, Calyon, Gulf International Bank, ING Bank, Mizuho Financial Group, Royal Bank of Scotlandand Standard Chartered Bank.

Sources close to the deal say bank bids from the 24 institutions to have received the preliminary information memorandum (PIM) were aggressive, and this has contributed to what is expected to be extremely tight pricing. The MLA banks are expected to be offered upfront fees of 90 basis points (bp). The margin on the 15.5-year facility is likely to start at 40 bp over Libor pre-completion. Post-completion it starts at 55 bp and rises to 110 bp.

‘This is very thin indeed,’ says one of the potential MLAs. ‘But it needs to be put in context: the facility is almost built, so the pre-completion pricing is healthy; and the strength of the credit is excellent – strong shareholders, strong offtakers, etc. The pricing was also driven down by the ravenous appetite for liquefied natural gas [LNG] exposure among international banks. For some players the fear of being left on the outside has sharpened bids.’

The pricing should also be seen in the context of the $175 million, 8.5-year facility extended to Oman LNG to cover its 36.8 per cent equity position in QLNG. Its margin steps up from 45 bp to 55 bp (MEED 27:8:04).

‘One of the interesting questions will be how widespread a potential syndication could be,’ says another of the potential MLAs. ‘With this pricing all the regional banks are pretty much ruled out, and among the international banks there will be no shortage of those that will take the view that they wanted in at MLA level or nothing.’

Citigroup is acting as financial adviser on the deal, which is being used to part finance the construction of a single LNG train at Sur.