With the international syndicated loan market still reeling from the impact of the credit crunch, the recent successful completion of the three-year $125 million syndicated secured Ijara facility arranged for Kuwait’s Burgan Company for Well Drilling, Trading & Maintenance, has buoyed especially the Islamic syndicated market, with bankers suggesting that several more such facilities are in the pipeline.
The facility was lead arranged by Liquidity Management House for Investment Company, a wholly-owned subsidiary of Kuwait Finance House (KFH), the London-based Gatehouse Bank PLC and BNP Paribas Najmah. The former two also acted as bookrunners. Participating banks in the syndication included the above three, plus Ahli United Bank B.S.C. of Bahrain, Boubyan Bank K.S.C in Kuwait, Eamar of the UAE, Kuwait Finance House (Malaysia) Berhad and the London-based European Finance House, a subsidiary of Qatar Islamic Bank.
Such Islamic market optimism, for instance, was clearly shown by Emad Al-Monayea, chairman and managing director of Liquidity Management House, who reiterated at the signing of the facility that “this transaction will build up the confidence of the local, regional and the international market and at this stage we need more transactions like Burgan, a company with sound financials, strong cash flows and solid leadership. Over the last two decades KFH and its subsidiaries has been committed to the growth of respective local economies and has been a keen supporter of the oil and gas industry, which is the main driver of the Kuwait economy.”
Although the arrangers consider this facility as the first corporate finance syndication out of Kuwait and the Middle East thus far this year, Kuwait Turk Participation Bank, the largest Turkish Islamic bank which is a wholly-owned subsidiary of KFH, did successfully go to the market in April this year to raise $250 million through a syndicated Murabaha facility. Although the Burgan facility is a vanilla syndication, some of the arrangers such as Gatehouse Bank consider it as a “back to basics” product. The Ijara facility also marked the debut of Burgan Company in the Islamic syndicated market and probably suggests that the conventional debt market is still wary of financing the corporate sector even in GCC oil-based markets. Yet, Burgan Company resisted the temptation to increase the original amount of the facility given that it was well oversubscribed. The proceeds of the facility, according to Gatehouse Bank, will be used to finance the purchase of four oil rigs and is fully secured by the rigs and their associated off-take contracts with the Kuwait Oil Company. The facility is priced at 3.5 percent per annum over the relevant LIBOR.