The first clear picture on the shape of the proposed $1,550 million financing package for the fifth potline at Aluminium Bahrain (Alba)began to emerge in early November. It is expected that a five-tranche structure will be used and that regional financial institutions rather than international banks will provide the bulk of the liquidity.
The largest tranche is likely to be a $500 million, 12-year commercial facility (MEED 1:11:02). It is expected that 10 banks will share the lead arranging mandate. Those lined up are Gulf International Bank (GIB), National Bank of Bahrain (NBB), Bank of Bahrain & Kuwait (BBK), National Bank of Abu Dhabi, Qatar National Bank, Riyad Bank, Mizuho Financial Group, Sumitomo Mitsui Banking Corporation, Bank of Tokyo-Mitsubishiand HSBC Investment Bank. The commercial tranche has a step-up pricing structure starting at 80 basis points (bp) over Libor, rising to 120 bp.
'It is pretty cheap - and this might be one of the reasons that international banks have shown reluctance, though it is at least considerably more reasonable than the 50 bp given to Dubal [ Dubai Aluminium],' says one of the participating bankers.
An Islamically-structured tranche, worth $250 million and carrying a 12-year tenor, is also expected. It is understood that ABC Islamic Bank, Shamil Bank of Bahrainand Dubai Islamic Bankare leading this tranche, and that GIB and possibly Kuwait Finance Housemight participate.
The third tranche is a $200 million bond. Bankers say no final decision has been taken, but the likelihood is that it will be denominated in Bahraini dinars and predominantly placed in the Bahraini market. NBB, BBK, Securities Investment Companyand Gulf Investment Corporationare expected to be the key players in this element of the transaction.
The fourth tranche is slated to be a $300 million metals-linked facility involving banks matching Alba's forward sales. Goldman Sachs and GIB are understood to be leading this tranche. 'It looks like Goldman Sachs will do the hedging and GIB will provide the underlying liquidity,' says a banker involved in the transaction.
The final tranche, the last to be put in place, is a $300 million facility from Japan Bank of International Co-operation (JBIC). The JBIC facility will be dependent on a sizeable proportion of equipment for the Alba expansion being sourced from Japan, with Japanese trading houses offtaking significant proportions of aluminium.
'At one point the commercial facility was looking like it was going to be for $800 million, but JBIC has come in and made that a lot easier,' says the banker. 'However, there is no getting away from the fact that there is only one European bank in the whole transaction. This says two things: first, this deal is difficult to get past credit committees; second, it reinforces the view that international banks are needing ever-greater persuasion to climb into regional transactions.'
Bankers are expecting to have a draft commitment letter circulated by mid-November, and the facility signed by the end of the month. 'There are still a number of outstanding problems, not least among them the intercreditor issues and the strategy for selling down the different tranches,' says a participant. 'The assumption has to be that they co-ordinate very closely the syndication process, but this could also become pretty complicated.'
Taylor-DeJonghis acting as Alba's financial adviser and Norton Roseis legal adviser.
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