May 2003
Project finance faces up to change
The aftermath of war in Iraq may delay a few project finance deals in the Middle East but the market is in good health. Development diversification will spur large projects. Sponsors, however, may have to accept more costly financing.
DRAMATIC CHANGES IN the way project finance deals in
the Middle East are structured are being predicted by leading
banks involved in advising the sponsors and arranging the
loans.
They forecast that an era in which the banks have fought to
offer ever cheaper money for periods of up to 20 years will come to
an end later this year as sponsors accept more realistic terms. The
market will also be tested as some of the big natural gas projects
seek to raise $2 billion-plus in non-recourse finance.
Other trends include a more significant role for regional banks,
such as Arab Banking Corporation (ABC), National Bank of Abu Dhabi
and Gulf International Bank (GIB), which have built up expertise in
an attempt to win more advisory and lead-manager business. Bankers
also expect a sharp increase in the involvement of export credit
agencies, whose participation in the past five years has been
limited. More Islamic banks are...
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