Middle East Trader FAL Oil Close To $700 Million Debt Restructuring

Middle East Trader FAL Oil Close To $700 Million Debt Restructuring

Middle East trader FAL Oil is close to securing an agreement to restructure about $700 million of its debt with creditors that will include additional loans to keep its operations going, at least two company sources told Reuters.

April 16, 2012 3:45 by kippreport

FAL Oil, based in the United Arab Emirates (UAE), was up until recently considered to be one of the biggest privately run Middle East trading firms. But it has been struggling to keep its business operations in full swing due to a lack of funds.

Earlier this year it was sanctioned by the United States for its role in supplying gasoline into Iran.

“Banks (creditors) have in principle agreed on the restructuring but it is not yet complete because of the delays in the execution of certain documents,” one company source said.

“It is going to be a package … one is a standstill agreement for the $700 million for a certain period, the other is new money … a loan for $620 million to work on our business”, the source said, referring to working capital needs.”

FAL Oil has put forward a medium-term plan with its creditors which allows it to generate income to repay the core debt of $700 million.

“For the time being, (if the plan is accepted) we will be paying only the interest for the new and old debt,” the source said.

The sources spoke on condition of anonymity, citing the sensitivity of the matter.

The company was not immediately available for comment.

FAL Oil’s creditors include Standard Charted Bank, which is heading the steering committee, along withBarclays Capital and Saudi Arabia’s SAMBA Financial.

The UAE banks who are involved include Emirates NBD , Commercial Bank of Dubai, MashreqBank , National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Union National Bank and First Gulf Bank.

KPMG is the financial advisor for FAL Oil and PriceWaterHouse Coopers (PWC) is advising the banks.

A lack of funds has forced FAL Oil to cut its fuel oil and bunkering business in the United Arab Emirates by as much as 60 percent. It has also shut down trading operations in the last few months at its unit inSingapore and London, sources familiar with the company operations said.

“With no banking lines, we cannot bid and there is no bank financing for the oil business, so we had to cut our business drastically, more than a 60 percent cut,” the source said.

FAL Oil tangled with the Pakistan State Oil Company (PSO) in October after failing to meet contractual agreements.

(Reporting by Luke Pachymuthu; Editing by Kim Coghill)

By Stanley Carvalho and Luke Pachymuthu