State-owned Qatar Telecom (Qtel) is looking for banks to act as mandated lead arrangers on the refinancing of a $2bn loan in a move that the firm hopes will help it to lower its borrowing costs.

Qtel has issued a request for proposals (RFP) asking for banks to respond to the financing invitation by the end of March. The deal will refinance an existing loan that matures in November 2011 and pays a margin of 250 basis points above the London interbank offered rate (Libor). The RFP for the new deal was issued in mid-March.

Bankers close to the deal say Qtel is keen to capitalise on lower pricing in the loan markets since the existing facility was put in place in September 2009.

“Qtel wants to take advantage of the improvement in the market since this deal was done,” says one banker close to the deal. “The company should be able to get pricing closer to the Qatar sovereign credit default swap (CDS) rate.”

Qatar’s CDS rate is currently at around 80 to 90 basis points, meaning Qtel may be able to get pricing down to about 100 basis points above Libor. The existing $2bn Qtel loan was arranged by UK’s Barclay’s Capital and Royal Bank of Scotland, France’s BNP Paribas, Singapore’s DBS Bank, Japan’s Mitsubishi UFJ, and Qatar National Bank.

The Qatari economy is expected to record double-digit growth in 2010, leading to a huge demand for investor exposure to the country. In mid-March, Qatar Aviation received around $2bn of commitments from banks for a loan of only $650m, although that deal was priced at 250 basis points above Libor. Given that it also carried a sovereign guarantee, it was a particularly attractive deal for banks to fund.