Syndicated loans for Gulf projects are growing

Jan 29, 2003 01:00 AM

Syndicated loans for Gulf projects are growing with nearly $ 61.2 bn advanced by international and regional banks in the last five years. Also, refinancing is becoming a regular feature in the Gulf.
"International and regional banks will continue to be active in financing projects in different sectors, liquidity will be strong and even if political issues have to be factored in, the banking market is still good," Declan Hegarty, assistant director, project finance, HSBC, told the fourth Oil Refining & Petrochemicals in the Middle East conference. "In the last five years alone, total volume of international syndicated loans touched $ 61.2 bn and recent transactions (ongoing) are large, with more business to be done in the next 18 months," he said.

Competition for funding is due to accelerate in the next two years with transactions totalling $ 16.7 bn. In the UAE alone, bankers are preparing for three major transactions -- the $ 2.5 bn Dolphin project, the $ 1.2 bn Umm Al Nar power project andthe new $ 1 bn Mirfa power project. Saudi Arabia has projects worth $ 2 bn underway while Oman projects' value is over $ 3 bn. Kuwait and Bahrain also have projects worth nearly $ 3 bn.
In the last five years, corporates accounted for the largest segment, borrowing 72 % of total syndicated loans while the government borrowed only 6 %. Banks and financial institutions took a 22 % share. Again, while 53 % of the loans went for project financing, 17 % went for aircraft deals, 11 % to corporates and 6 % for refinancing.

Hegarty said regional and "aspirant regional" banks are still highly liquid and are increasingly taking a pan-GCC approach to project financing. International banks, particularly European and Japanese, remain committed to the region and continue to recognise the GCC as a key project finance market.
The Islamic financial market is also developing fast, matching tenor and pricing with those of commercial banks. "It is a fast growing source of funds, there's strong investor liquidity and Islamic investors are looking at more complex structures such as project finance."

Source: Gulf News Online
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