'There is appetite among the banks to take very large positions in this deal, but for some of the small and medium-sized players that could involve breaching the ceiling of single-borrower exposure,' says one of the potential participants in the transaction. Existing banking regulations limit exposure to any one debtor to 25 per cent of a bank's core capital. A number of Saudi banks already have significant exposure to SEC and the SR 1,000 million ($267 million) tickets some are interested in on the current transaction would push them over the limit.

'This is a grey area, as SEC can be seen as a quasi-government institution and, if pressure is applied to SAMA from the pinnacle of government, we could see a waiver put in place,' says the banker. 'At the moment, the original SR 4,500 million [$1,200 million] can just about get done without any manoeuvring, but the facility could get considerably bigger if a waiver is obtained.'

It is understood that no attempt will be made to obtain any sort of sovereign guarantee that would underpin the loan and bypass the need for a waiver from SAMA on the single-borrower exposure ceiling rule.

Banks have until 21 March to table their commitments for the transaction. National Commercial Bank (NCB), Saudi American Bank (Samba), Riyad Bank, Saudi British Bank, Banque Saudi Fransi, Saudi Hollandi Bank, Arab National Bank and Saudi Investment Bank were invited to participate (MEED 27:2:04). However, sources expect one, or possibly two, of these to decline.

Gulf International Bankis acting as SEC's financial adviser on the deal and could also participate in the facility. The relative balance sheet strength of the likely participants suggests NCB and Samba could take significant positions.

The 15-year borrowing is being arranged on a club basis, but the possibility remains of a limited syndication. 'We could see some of the regional banks, such as National Bank of Kuwait, National Bank of Bahrainand Emirates Bank International, that have recently received local banking licences participating,' says a senior Saudi banker. 'What is the point of them coming into the market if they are unwilling to bank the main corporates?'

Pricing remains far from fixed, but some are expecting it - on an all-in basis - to be in a range of 200-250 basis points over the Saudi interbank offered rate (Sibor).

The original SR 4,500 million ($1,200 million) was intended to part-finance the proposed expansion of the Shouaiba power complex. 'SEC has a very heavy capex [capital expenditure] programme, particularly on transmission and distribution, which over the next four years amounts to SR 24,000 million [$6,400 million],' says the banker. 'Expanding this facility would help.'