Zain Saudi inks loan deal with major Chinese bank

Updated 17 August 2016

Zain Saudi inks loan deal with major Chinese bank

JEDDAH: Mobile Telecommunication Company Saudi Arabia (Zain), a unit of Kuwait’s Zain, has signed a long-term commercial facility agreement for a loan with a two-year tenor, which can be extended by a year.
Zain's deal is for a $600 million loan from Industrial and Commercial Bank of China Ltd., replacing a facility of it signed with regional banks two months ago, the Riyadh-based telecom company said in a statement posted on Tadawul website.
This new facility will have a lower financing cost compared to the existing facilities based on the terms.
The new move also highlights the fact that China’s largest bank is boosting lending in Saudi Arabia, increasing its foothold in the biggest Arab economy as growth slows in its home market.
The deal was signed on Aug. 15 for a total loan amount of $599,808,061.42 (SR2,249,280,230.33).

Financing cost

The initial loan duration is from Aug. 29, 2016, to Aug. 15, 2018, which can be extended till Aug. 8, 2019.
The proceeds of this facility will be used for repaying an existing facility with syndicate indicated in the company’s announcement on Tadawul website on June 5, 2016.
The objective also is to improve terms and reduce financing cost by approximately SR175 million over the three-year period, by reducing the margin and converting from Saudi riyals to dollars.
Zain Group offers an unconditional and irrevocable loan guarantee.
Chinese banks are boosting lending in the Kingdom. ICBC also lent Saudi Electricity Co. $1.5 billion in June to fund projects and provided $950 million to the Saudi government as part of the country’s $10 billion loan in May.
China’s broadest measure of new credit and another key gauge of lending increased at the slowest pace in two years in July, suggesting monetary authorities are more concerned about swelling financial risks than giving a boost to old growth engines. Curbing financial risks has increasingly become a policy priority after economic growth stabilized in the second quarter.
Loan growth in China will slow from double-digit levels, which means that banks are looking at international markets for growth, according to Anita Yadav, head of fixed-income research at Emirates NBD PJSC, Dubai’s biggest bank, by phone from Dubai.
“Telecoms are like a utility business and investing in the industry in Saudi Arabia will be reasonably safe,” he added.
Syndicated loans in the six-nation Gulf Cooperation Council, which includes Saudi Arabia and the UAE, have surged in 2016 as governments seek to bridge deficits caused by oil’s decline. They’ve risen 26 percent to $74.8 billion, the highest since at least 2005.
ICBC has jumped to be the ninth-biggest provider of syndicated loans in the GCC this year, while it was ranked 54th in 2015, according to the data. It was also a lender to Kuwait’s Equate Petrochemical Co. KSC’s $5 billion syndicated loan in June and a 2.25 billion-euro loan ($2.54 billion) to Qatar National Bank in May.
Zain Saudi had raised the riyal facility from Arab National Bank, Banque Saudi Fransi, Gulf International Bank and Samba Financial Group in June, replacing a similar loan from the same group.

Davos 2019: Mideast CEOs turn gloomy on global economy, PwC study finds

Political and business leaders are gathering in the mountain resort of Davos in Switzerland this week. (AP)
Updated 9 min 25 sec ago

Davos 2019: Mideast CEOs turn gloomy on global economy, PwC study finds

  • The loss of confidence from regional CEOs was the second biggest fall in the world, beaten only by North American bosses, whose optimism fell from 63 percent to 37 percent

DAVOS: Chief executives in the Middle East are much less confident on prospects for the global economy than they were in 2018, according to a report from accounting and consulting group PwC.

The firm’s annual survey of top bosses’ attitudes, traditionally launched on the eve of the World Economic Forum Annual Meeting in Davos, showed a big drop in the number of CEOs from the region who believe global economic growth will improve in the next 12 months.

Only 28 percent of Middle East business leaders now see an improvement in economic prospects, compared with 52 percent this time last year. Bob Moritz, global chairman of PwC, said: “The prevailing sentiment this year is one of caution in the face of increasing uncertainty.”

The loss of confidence from regional CEOs was the second biggest fall in the world, beaten only by North American bosses, whose optimism fell from 63 percent to 37 percent.

PwC said that the Middle East decline was due to “increased regional economic uncertainty,” while the North American fall was “likely due to the fading of fiscal stimulus and emerging trade tensions.”

The results of the PwC poll - conducted among 1,300 business leaders around the world - reflected an overall decline in business confidence in each region surveyed. Last year, only 5 percent of CEOs said that global economic growth would decline. For 2019, this has jumped to nearly 30 percent.

Globally, confidence in CEOs’ own companies to grow revenue this year has also fallen sharply. Moritz said: “With the rise in trade tension and protectionism it stands to reason that confidence is waning.”

The US retains its lead as the top market for growth among international investors, but many CEOs are turning to other markets, or investing at home. The ongoing trade conflict between the US and China has resulted in a sharp decline in the number of Chinese bosses chosing the US as a market for growth, down from 59 percent last year to only 17 percent for 2019.

Globally, CEOs are still more worried about the threat of over-regulation of their businesses - named as the top concern again in 2019 - but uncertainty about policy has become a major issue too.

In the Middle East, the main concern is geopolitical uncertainty, followed by the threat of cyberattack, policy uncertainty and the speed of technological change.