September 06, 2008

Banks disagree on revised terms for QASCO financing deal - Report

MeSteel recently reported that banks involved in the USD1.3 billion financing deal for Qatar Steel Company are struggling to agree terms with the sponsor and financial adviser.

The report cited sources close to the deal as saying that Ernst & Young, the financial adviser to Qasco, began contacting potential lead arrangers with revised terms from September 17th 2007 and several banks are now expected to reject the new terms.

As per report “Among the changes are spreads that now reach more than 75 basis points over the London interbank offered rate during the life of the project. Previously the debt was prices at 60 basis points. The original financing for the project in 2005 was arranged at 80 to 100 basis points. The present refinancing is expected to use only eight lead arrangers.”

Banks in the mandated lead arranger group now want a degree of flexibility in the financing structure, allowing them to vary the pricing on the deal during the syndication process according to demand in the market.