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Qatar Aviation to reprice $650 mln loan-bankers

Qatar Aviation to reprice $650 mln loan-bankers

September 23, 2010 11:15 by

Qatar Aviation Leasing, owned by the Qatar government, has launched syndication of a $650 million loan agreed earlier this year in order to reduce the pricing, banking sources close to the deal said.

Qatar Aviation, set up to purchase aircraft and lease them to Qatar Airways, signed a $650 million, three-year loan in March with a margin of 250 basis points (bps) over LIBOR and the new agreement will see pricing halve to 125 bps, the bankers said.

The original loan, which carries a sovereign guarantee, was widely regarded as carrying generous pricing — 250 bps compared favourably with Qatar’s five-year credit default swaps (CDS) that were priced at 87 bps at the time of signing. Together with the attractive structure — it was also fully underwritten and pre-funded — the pricing helped the deal raise $2 billion in the market.

The new loan will also carry a sovereign guarantee and has been underwritten, and the 125 bps margin still compares favourably with Qatar’s current five-year CDS level of 96 bps, but it remains to be seen how many of the Gulf’s regional banks — shackled by their high cost of dollar funding — involved in the original transaction will be able to recommit.

Of the 30 banks in the original syndicate, 16 are from the Gulf region. Most of the regional banks are expected to be priced out of the deal, bankers say, but those that do renew will be able to take a larger allocation after large scale-backs on the original loan.

“Pricing will be too tight for some banks so expect a smaller lender group, but at least banks are more likely to keep their preferred allocation this time,” one of the bankers said. The new deal has been underwritten by bookrunners Deutsche Bank and Standard Chartered Bank, while six further banks — Arab Banking Corp, DBS, HSBC, International Bank of Qatar, Samba Financial Group and SMBC — have joined on a take and hold basis with additional fees paid for upsizing commitments.

Lenders are being offered a participation renewal fee of 25 bps, one of the bankers said.

(Reporting by Christopher Mangham; Editing by Greg Mahlich)

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