Kuwait, Other Mideast Nations to Seek Western Bank Funding
LONDON -- Led by Kuwait, various Middle East nations are preparing to tap Western banks and financial markets for funding to help rebuild their war-ravaged region.
Kuwait said it wants to borrow $33 billion on world money markets to rebuild its economy, which was devastated during seven months of Iraqi occupation.
The Emir's Decree
A decree published Monday by the emir, Sheik Jaber Ahmed Sabah, instructed the Kuwait Finance Ministry to obtain loans "in various international financial markets."
This will be the biggest Mideast financing since Saudi Arabia this year raised $3.5 billion from an international banking group headed by J.P. Morgan & Co. The funds were sought to supplement Saudi reserves, after the oil kingdom pledged $48 billion toward the Persian Gulf war effort.
London-based bankers indicated that Kuwait's financings will be coordinated in Britain by the Kuwait Investment Authority, which controls along with affiliates much of the oil state's $100 billion in foreign assets.
They expect Kuwait to pledge at least part of these foreign holdings, in Western stock and bond markets and in a number of major corporations, as collateral for the funding. Overseas assets include a 9.9% stake in British Petroleum PLC, Britain's big oil company, worth more than $3.5 billion.
Kuwait Airways Seeks Planes
Kuwait is also planning to rebuild its national aircraft fleet, bankers said. Kuwait Airways is seeking 20 European-made Airbus planes, in a package valued at up to $2.5 billion.
The aircraft financing arms of Chase Manhattan Corp., Manufacturers Hanover Corp., and Bankers Trust New York Corp. are reported to be among those competing to finance the purchases.
As relative calm returns to the region, Western bankers have reported that several other large regional financings are reappearing after being put on hold by the Gulf conflict.
Saudi Arabian Basic Industries Corp. is examining a number of loans, of up to $500 million apiece, to develop the oil state's petrochemical sector, bankers said.
Chase Syndicates Smelter Loan
Chase Manhattan is syndicating out of London a $110 million loan for Aluminium Bahrain BSC, a company that operates a major alumina smelter complex in the Gulf. It has already raised $650 million in bank financing for the project.
A Chase spokesman confirmed that bank participants are being sought for the new five-year loan at basic pricing of five-eights of a percentage point more than the benchmark London interbank offered rate, or Libor.
Meanwhile, Turkey, which shares a border with Iraq, is seeking a $200 million syndicated loan for general state development purposes.
Two Japanese banks, Sumitomo Bank Ltd. and Mitsubishi Bank Ltd., are offering the three-year loan with a margin of 90 basis points over the London interbank offered rate, bankers said.
Bank funding for Turkey had virtually dried up this year because of the Gulf conflict, bankers said.