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July 2008 | ifr special report | 15 MIDDLE EAST LOANS ROUNDTABLE

than we were and therefore the critical direction that credit committees and portfolio managers and your executive are directing at you is: you've got to make sure that you are giving real value return on the capital that you are actually expending. That's really what's driving a lot of the areas that we are actually seeing.

Grainne Molloy : Within project finance, the opportunity for revenue upside is compelling because of the derivative income that banks can earn, particularly at the senior level.

Raouf Jundi : The issue in the project finance market is really capacity. Project sizes are getting bigger, but the banks lending to them are not and sometimes shrinking and, multi-nationals such as JBIC are also reducing their exposure. So there is a real issue and I'm not sure how that's going to be addressed.

IFR: Do you think we might see more leverage structures as much as that level of pricing would appeal to insti- tutional investors?

Peter Bulbrook : Quite potentially for insti- tutional and specific industry fund investors.

Raouf Jundi : There are some funds being set up purely for the infrastructure market.

Rizwan Shaikh : We have already seen capital markets financings for projects in Qatar. There are structures available to tailor the amortisation profiles to match project cash flows. In fact, you can get longer duration in capital markets than the bank market. So that alternative is certainly available for better rated credits, at a certain cost. In terms of leverage structures, with the growth of infrastruc- ture funds who are mostly interested in equity like returns, you may see equity

substitutes /mezzanine tranches appearing in projects capital structures.

Peter Bulbrook : Certainly in a limited bank market. It's going to be a market that's going to develop or need to develop pretty quickly. It's going to have to be pretty dynamic in considering all of this possible tranching, because bank market capacity alone will not fund the US$1 trillion worth of infrastruc- ture type projects that are pending.

Raouf Jundi : The capital markets will not provide the real solution. Although some deals have been structured for the capital markets, capital markets have to fund everything on day one, which is costly, whereas in the loan market the project draws over a period of three years. Secondly, traditionally in project structures there are waivers almost every week. You can't go to 5,000 bond investors and ask them for a waiver, it's not practical.

Middle East Loan Syndication Contacts

Francesco Carobbi Head of Syndications 12 – 15 Finsbury Circus London EC2M 7BT Office: +44 (0)207 577 1246 / Mobile: +44 (0)7785 516 386 / Fax: +44 (0)207 577 1264

Raouf Jundi Head of Origination Middle East & Africa 12 – 15 Finsbury Circus London EC2M 7BT Office: +44 (0)207 577 1272 / Mobile: +44 (0)7767 310 143 / Fax: +44 (0)207 577 1264

Peter Hanrott Head of Loan Markets 12 – 15 Finsbury Circus London EC2M 7BT Office: +44 (0)207 577 1256 / Mobile: +44 (0)7918 721 677 / Fax: +44 (0)207 577 1264

Warren Withfield Assistant Vice President 12 – 15 Finsbury Circus London EC2M 7BT Office: +44 (0)207 577 1525 / Mobile: +44 (0)7918 724 419 / Fax: +44 (0)207 577 1264

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