Zain Saudi inks loan deal with major Chinese bank

Updated 17 August 2016
0

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.


OPEC oil ministers gather to discuss production increase

Updated 19 June 2018
0

OPEC oil ministers gather to discuss production increase

  • Analysts expect the group to discuss an increase in production of about 1 million barrels a day
  • The officials were arriving in Vienna ahead of the official meeting Friday

VIENNA: The oil ministers of the OPEC cartel were gathering Tuesday to discuss this week whether to increase production of crude and help limit a rise in global energy prices.
The officials were arriving in Vienna ahead of the official meeting Friday, when they will also confer with Russia, a non-OPEC country that since late 2016 has cooperated with the cartel to limit production.
Analysts expect the group to discuss an increase in production of about 1 million barrels a day, ending the output cut agreed on in 2016.
The cut has since then pushed up the price of crude oil by about 50 percent. The US benchmark in May hit its highest level in three and half years, at $72.35 a barrel.
Upon arriving, the energy minister of the United Arab Emirates, Suhail Al Mazrouei, said: “It’s going to be hopefully a good meeting. We look forward to having this gathering with OPEC and non-OPEC.”
The 14 countries in the Organization of the Petroleum Exporting Countries make more money with higher prices, but are mindful of the fact that more expensive crude can encourage a shift to renewable resources and hurt demand.
“Consumers as well as businesses will be hoping that this week’s OPEC meeting succeeds in keeping a lid on prices, and in so doing calling a halt to a period which has seen a steady rise in fuel costs,” said Michael Hewson, chief market analyst at CMC Markets UK
The rise in the cost of oil has been a key factor in driving up consumer price inflation in major economies like the US and Europe in recent months.
Already US President Donald Trump has called on OPEC to cut production, tweeting in April and again this month that “OPEC is at it again” by allowing oil prices to rise.
Within OPEC, an increase in output will not affect all countries equally. While Saudi Arabia, the cartel’s biggest producer, is seen to be open to a rise in production, other countries cannot afford to do so. Those include Iran and Venezuela, whose industries are stymied either by international sanctions or domestic turmoil. Iran is a fierce regional rival to Saudi Arabia, meaning the OPEC deal could also influence the geopolitics in the Middle East.