Zain Saudi inks loan deal with major Chinese bank

Updated 17 August 2016
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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.


Moody’s raises GDP growth forecasts for Saudi Arabian economy

Updated 18 October 2018
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Moody’s raises GDP growth forecasts for Saudi Arabian economy

  • The Moody’s report released on Wednesday maintained the Kingdom’s A1 rating
  • he agency expects higher oil production to boost the Saudi economy

LONDON: Moody’s has raised Saudi Arabia’s GDP growth forecast for 2018 to 2.5 percent from 1.3 percent as it maintains a “stable outlook” for the Saudi economy.
The ratings agency also increased its 2019 GDP forecast to 2.7 percent, well above the 1.5 percent previously predicted, the Kingdom’s Ministry of Finance said.
Moody’s numbers exceed the forecasts of the Saudi Arabian government for the 2019 budget announced in September.
The Moody’s report released on Wednesday maintained the Kingdom’s A1 rating.
The agency expects higher oil production to boost the economy, but also said developments in the non-oil sector will contribute to stronger GDP growth in the medium and long-term.
Moody’s said the Saudi government deficit for the 2018 and 2019 will hover between 3.5 percent and 3.6 percent, a far cry from its previous expectations of 5.8 percent and 5.2 percent.
Moody’s commended Saudi Arabia’s reasonable control of expenditure, even in the face of higher oil revenues.
“In addition to the moderate funding requirements, the government is able to access ample sources of liquidity, from both domestic or international capital markets and financial reserves. It is unlikely to face problems in financing the fiscal deficit,” the report said.
Last week, the IMF lifted its projections for economic growth in Saudi Arabia saying the Kingdom’s economy is expected to grow by 2.2 percent in 2018 and 2.4 percent next year, raising previous projections by 0.5 percent.