With Lenders Eager, Kuwait Borrowing More

LONDON - The Persian Gulf oil emirate of Kuwait is increasing the size of its international bank loan facility by $500 million, to $5.5 billion, after heavy oversubscription by lenders.

Announcing the increase Tuesday, lead manager J.P. Morgan & Co. said that in the two phases of syndication of the loan, placed among banks from 18 countries, a total of $7.89 billion was raised.

This ranks as one of the biggest global banking loans yet raised for a sovereign country, bankers said.

The Loan Participants

Kuwait decided last month to approach banks for funding to help it recover from the affects of the war precipitated by the Iraqi invasion of August 1990.

A total of 80 banks supported the $5.5 billion loan, with several major U.S. banks represented.

The loan was equally underwritten by 24 lead managers who made initial commitments of $208 million each. The funds raised in general syndication will be partly applied to reducing that commitment to $150 million and partly to raising the overall size of the facility.

Lead managers in addition to Morgan included Chase Manhattan, Chemical, and Citicorp, with management takes of $150.2 million apiece.

Bank of New York went in as a colead manager, at $75 million. First National Bank of Chicago was a manager, at $25 million.

Worries in Britain

British banks, although declining to take part in the loan as prominent lead managers, participated at a lower level, syndicate details released by Morgan showed.

Many U.K. bankers said they were concerned about the size of the underwriting commitment, given Kuwait's status as a high risk country for capital adequacy purposes.

The failure of British banks to take a major role in the financing was regarded as potentially damaging to British chances for contracts Kuwait will award to rebuild cities, roads, the oil industry, and other infrastructure, bankers said.

Barclays Bank PLC and Royal Bank of Scotland PLC were managers, with a $25 million management take apiece, while Midland Bank PLC took $15 million.

Terms of the Credit

The five-year loan carries interest charges of half a percentage point above the London interbank offered rate. The underwriting banks get an additional 45 basis points for their role.

Other European and Japanese banks responded warmly to the deal in general syndication, though the largest position was taken by the Arab Petroleum Investment Corp., a regional development fund based in Saudi Arabia, which contributed $125 million.

Bankers said Kuwait is also due to tap banks for $790 million in order to replace aircraft seized or destroyed by Iraq during its occupation.

Kuwait Airways is proposing to raise the funding to finance the delivery of 10 European Airbus aircraft during 1992 and 1993, bankers said.

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