Saudi Arabia’s Al-Fanar to raise $800m

16 February 2012

Local corporate tries to get low pricing on $800m refinancing

Saudi Arabia’s Al-Fanar Group has begun approaching banks for a SR3bn ($800m) loan deal that it aims to close by around April, according to bankers in the country.

The company has appointed the local Samba to arrange the deal, and about 17 banks have been approached to finance the loan, including local and some regional banks. The deal will have a tenor of around five years.

Ziyad Ibrahim, chief financial officer at Al Fanar says, “Our existing debt is short term and we want to restructure that into medium term debt and also reduce our financing costs.”

The last corporate loan deal to be closed in Saudi Arabia was a SR10bn loan arranged for telecoms firms Etihad Etisalat (Mobily). Pricing on that loan started at just 65 basis points above the Saudi interbank offered rate (Sibor).

“It will be difficult for Al-Fanar to get pricing close to what Mobily achieved,” says one banker in Riyadh. Ibrahim adds, “Mobily is a public company and Al-Fanar is private, so there is a big difference between us. We feel we will be able to get good pricing though.”

Banks are due to respond to the financing invitation from Al-Fanar by 22 February, although this date may be extended as some of the lenders may need more time to evaluate the deal. Proceeds from the deal will be used to refinance existing debt, according to several bankers with knowledge of the deal. “Al-Fanar has a lot of short-term debt that it wants to refinance and extend the maturity of,” says another banker at a Saudi based lender.

The high volume of liquidity in the Saudi banking sector has been driving down the interest cost on loans over the past two years, and bankers expect that trend to continue in 2012. However, most of the borrowers that have capitalised on lower rates had strong state backing, while Al-Fanar is privately owned.

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