Saudi Arabia’s $16 billion syndicated loan cuts funding costs

Saudi Arabia’s planned $16 billion syndicated loan, one of the largest ever in emerging markets, will cut the kingdom’s cost of funding by paying banks much less than on previous borrowings.

The ministry of finance said on Twitter that it would offer banks a margin of 75 basis points over the London Interbank Offered Rate (Libor) for the loan, which Saudi Arabia’s Debt Management Office plans to close by mid-March.

Saudi Arabia’s loan in 2016 was its first jumbo debt deal after a slump in international oil prices hit its finances. It offered banks a margin of 103 basis points over Libor. Since then, the kingdom has issued $39 billion in international bonds.

Once completed, the revised debt facility will comprise an Islamic tranche corresponding to more than 30 percent of the size of the loan, which means in excess of $5 billion, the ministry of finance said on Twitter.

A group of 16 international banks will provide the new loan, the ministry of finance said, two more than the 14 international banks supporting the original $10 billion syndicated facility.

Linklaters and Zamakhchary & Co, Linklaters relationship firm in the Kingdom, advised the arrangers on the deal, which introduced a sharia compliant tranche alongside the conventional loan facility.

The Linklaters team was led by Kieron Zaman (picture), Banking partner and Omar El Sayed, Saudi Arabia Head of Banking and Finance.

Monaji Zamakhchary, Managing Partner and Martin Creek, partner at Zamakhchary & Co, advised on the Saudi law aspects of the transaction.

 

Involved fees earner: Monaji Zamakhchary – Zamakhchary & Co.; Martin Creek – Zamakhchary & Co.; Kieron Zaman – Linklaters; Omar El Sayed – Linklaters;

Law Firms: Zamakhchary & Co.; Linklaters;

Clients: Kingdom of Saudi Arabia;