31/01/2011 00:00 AST
BankMuscat Investment Banking, the leading financial advisor in the Sultanate, has successfully closed financing for the $562 million PET (polyethylene terephthalate — a type of plastic commonly used to package soft drinks, water and other products) project of Octal Petrochemicals.
BankMuscat acted as the financial advisor to Octal and raised equity, subordinated debt and senior debt from various investors and lenders based in and outside of Oman for this project.
Omani investors who subscribed to the equity include Nifco (National Investment Fund Company), Muscat Overseas, Oman Investment Corporation, Malatan Trading and Contracting, Oman and Emirates Investment Holding, Suhail Bahwan Group, DIDIC as well as BankMuscat.
The overseas investors participating in this transaction include individuals and institutions based in Saudi Arabia, Kuwait and the United States. The senior debt was raised from BankMuscat, Bank Dhofar, National Bank of Oman, Bank Sohar, Ahli Bank and Qatar National Bank. Further, the transaction also included refinancing of the entire existing senior debt.
Octal’s expansion
Post-completion of this financing, Octal now has a single senior debt facility with the same terms for all its lenders. The subordinated debt issue for project financing was a first for the local market and also oversubscribed.
AbdulRazak Ali Issa, chief executive of BankMuscat said: “The phase II expansion project of Octal is one of the few projects which achieved financial closure over the last two years, not only in Oman but in the Gulf Cooperation Council region. The project financing transactions with longer repayment tenors were challenging to close due to the unfavourable environment in the global debt financing markets.
“The successful financial closure of this transaction fosters BankMuscat Investment Banking team’s strong credentials in the financial advisory services. The team has worked on large and complex transactions in Oman and overseas and is known for its rigorous and analytical approach.”
Octal is a major player in the global PET industry, operating from its manufacturing facility in the Salalah Free Zone. Octal commissioned its first two manufacturing units at the beginning of 2009 with a nameplate capacity of 292,000 tonnes per annum and is currently undertaking an expansion plan, which will increase its capacity to 927,000 tonnes, upon completion in 2012.
Success journey
Nicholas Barakat, CEO and managing director of Octal, said: “BankMuscat has been a vital part of Octal’s success journey since 2005. The bank has added tremendous value to Octal and its stakeholders through its deep understanding of the local capital markets and strong relationships with the lenders and investors in Oman.
“The innovative and customised financing solutions offered by the bank such as introduction of subordinated tranche, short-term US dollar tranche, dual currency debt financing and fixed interest rate for Omani rial during the construction period, combined with superior execution skills were imperative to raise the financing for our company.
“The allocation of security package amongst the company lenders, working capital lenders and subordinated investors simplified the transaction structure for Octal.”
and was well received by the lenders and investors. We are pleased with the financial advisory services provided by BankMuscat to us and are proud of our long-term association with the bank.”
Times of Oman
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