October 5, 2017 / 4:18 PM / a year ago

LPC - Qatari loans test lenders' loyalties

LONDON, Oct 5 (Reuters) - A US$570m syndicated loan refinancing for Turkey-based QNB Finansbank is highlighting the growing difficulties facing international banks as they struggle to maintain impartiality in Qatar’s dispute with its neighbours, bankers said.

A US$3bn loan for Qatar National Bank, the Gulf’s largest lender, which needs to be refinanced before it matures in March 2018, is also set to test the market shortly as the crisis refuses to blow over.

International banks have been trying to maintain relations with both sides of the Gulf dispute, since Saudi Arabia, the UAE, Bahrain and Egypt imposed travel and trade restrictions on Qatar on June 5 and accused Qatar of backing terrorism, a charge that Doha denies.

Foreign banks are now coming under increasing pressure to take sides, however, as Saudi Arabia and the UAE take a tougher line and ramp up the pressure.

“International banks with operations in both places have been walking a tightrope and trying to keep the relationship open on both sides. This is difficult at the moment as the UAE is saying ‘you’re either with us or against us’” a senior Bahrain-based banker said.

Lenders active in regional lending, including Standard Chartered, HSBC and Bank of America Merrill Lynch, are coming under increasing pressure to take sides in the dispute.

Standard Chartered recently led a US$630m Formosa bond issue for Qatar National Bank in mid-September which was targeted at Taiwanese investors.

“The UAE banks are not crazy when they see a relationship bank supporting a Qatari client,” a second banker said.

Some banks are becoming less willing to be seen to be publicly participating in Qatari or Qatari-linked loans as a result and would prefer to lend below the radar.

“We do not want to be seen to be publicly supporting Qatari loans, maybe bilaterals and private deals, but nothing public,” a senior banker at a US bank said.

International banks are facing more pressure, which could pose a significant dilemma to banks, including Credit Suisse, Deutsche Bank and Barclays, that have some Qatari ownership.

“Two camps could emerge, one banking Saudi and the UAE and the other Qatar. We’re hoping it doesn’t come to that,” the senior banker at a US bank said.


QNB Finansbank’s loan is being sold to lenders as a Turkish deal and Turkish risk in a bid to circumvent the increasingly delicate issue.

QNB bought a 99.8% stake in Finansbank, which is headquartered in Istanbul, for €2.7bn from National Bank of Greece in December 2015 in a deal that closed in June 2016.

QNB has not guaranteed Finansbank’s loan, one banker said. Although the exposure could roll up to QNB itself, it is not the same credit risk and the loan is priced in line with other Turkish bank loans.

In an emailed statement to Thomson Reuters LPC QNB Finansbank said that there would be ‘no issues’ with raising the loan.

Although bankers expect the deal to get done, some banks could have difficulty supporting the deal for fear of how their support would be perceived by Qatar’s neighbours.

The size of QNB Finansbank’s refinancing has not been set to maintain flexibility if some lenders drop out, bankers said.

QNB’s larger US$3bn loan will pose a more significant dilemma. The loan was co-ordinated by Barclays and HSBC with Bank of Tokyo-Mitsubishi UFJ, Deutsche Bank, MUFG, Standard Chartered Bank and SMBC acting as initial mandated lead arrangers and bookrunners.

The deal had tight relationship pricing of 60bp over Libor, which is likely to rise as Qatar is facing higher funding costs and lenders are seeking a risk premium.

If some lenders are unable to join the deal, QNB could either refinance some of the US$3bn loan itself, seek direct government funding or raise a smaller loan from banks which are not conflicted. Alternatively QNB could quietly go to its main lenders on a bilateral basis to raise the cash.

“They (QNB) will be able to refinance they will go to relationship banks and ask what they can give on a bilateral basis – or go and do a smaller deal with banks which can still lend,” a fourth banker said.

Bankers are discussing the possible imposition of economic sanctions, which would force banks to take sides although some bilateral lending could continue, as seen in Russia after economic sanctions were imposed in March 2014. (Editing by Christopher Mangham)

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