Saudi Telecom tries again with local banks

27 June 2011

Banks try to sell down exposure to $450m loan for Saudi Telecom Company

Saudi Telecom Company (STC) has launched the syndication of a $450m loan to the Saudi banks, just over a year after the deal was pulled from the market and financed by two international banks.

Meetings with Saudi banks were held on 27 June to start the process of the two banks selling down their commitments to the deal. Proceeds from the loan will be used to finance the expansion of STC’s Indonesian subsidiary Axis.

The UK’s HSBC had originally sought commitments of around $600m from the Saudi banks in early 2010 (MEED 26:02:10).

Aggressive pricing and concerns about the structure of the deal led HSBC and Germany’s Deutsche Bank to commit to fund the deal themselves in May 2011 as part of a $1.2bn funding package (MEED 24:05:11).

They are now going back to the Saudi banks hoping they will be more receptive to the deal. Sources in the kingdom say local banks have until late July to provide commitments to the loan, and that the two banks hope to complete the deal by the end of the month.

The commitments from the Saudi banks are expected to come in the form of Saudi riyal loans, although the deal has been funded half in dollars and half in riyals by the two international banks.

Pricing is understood to start at around 3 per cent, rising up to more than 4 per cent during the life of the 7.5 year loan.

It is unclear if enthusiasm for the deal will have improved since last year. “There is a lot of liquidity in Saudi banks and good relationship with STC, so people want to find a way to make this deal work, but there remain a few concerns,” says one banker in Riyadh.

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