October 7, 2016 / 2:32 PM / a year ago

LPC-Oman centre stage in Middle Eastern loan market

LONDON, Oct 7 (Reuters) - Oman is becoming a focus of the Middle Eastern loan market as more Omani companies line up to tap the international loan market, but the sudden upturn in borrowing from the Sultanate is stretching banks exposure limits, bankers said on Friday.

Oman’s government and state-linked firms are turning to the syndicated loan market as low oil prices weaken government finances and make it harder for the state to fund projects from internal resources.

“Activity at the moment in the Middle East is essentially centred around Oman, with a little bit in the UAE,” a banker said.

Oman Oil Company Exploration & Production (OOCEP) appointed Sumitomo Mitsui Banking Corp as financial advisor this week on a loan that is likely to exceed US$1bn, banking sources said.

Talks are still at an early stage and the upstream oil and gas company, a subsidiary of state-owned Oman Oil Co, is expected to raise the financing early next year, the sources said. The deal is likely to have a secured pre-export financing structure.

Parent Oman Oil Co (OOC) is also in talks with banks to amend the terms of a US$1.85bn revolving credit facility dated September 2014. The company is aiming to extend the maturity of the loan, one tranche of which is due to mature in 2017.

OCC’s existing 2014 loan consists of a US$1bn three-year facility and a US$850m five-year facility which was signed by 16 banks. J.P. Morgan and the Bank of Tokyo-Mitsubishi co-ordinated the deal.

The company was originally planning to extend the three-year 2017 tranche into a five-year tranche maturing in 2019 but OCC is now considering extending the maturity of the whole loan, including the five-year tranche, a second banker said, adding that the pricing will also be amended.

Another OOC-related deal was launched last month when MUFG launched the US$700m Salalah liquefied petroleum gas (LPG) project financing, which includes an equity bridge loan - the sponsor is Oman Oil Company, according to Project Finance International magazine.

Despite a shortage of Middle Eastern loans, mounting Omani exposure is leading bankers to question if there is sufficient bank appetite for the deals.

“If it is a well structured deal which pays well banks will find a way to do this even if they have exposure. These deals have always had a good following,” a third banker said.

Two large recent Omani loans, a US$1bn sovereign loan which closed at the end of the year and a US$4bn for Petroleum Development Oman (PDO), another upstream oil business - have already used up banks’ Omani credit limits.

“Bank capacity is an issue. Not only have we had the PDO and Oman sovereign deals but historically Oman has done a lot of project finance type loans which banks still have long dated exposure to - it will be difficult to juggle limits. Banks will have to pick and choose carefully what they can do,” the first banker said.

Last month the Omani government also raised a US$2.5bn bond, its first in almost 20 years, as part of a plan to borrow up to US$10bn abroad. (Editing by Tessa Walsh)

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