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Lpc egyptian borrowers face challenges raising syndicated loans


Oct 12 Egypt's return to the international syndicated loan market is being hampered by September's global volatility and the growing liquidity crunch in the Middle East, which is pushing loan pricing higher, banking sources said on Friday. Two loans for Egyptian banks that were launched before September are still in the market as lenders seek higher pricing to compensate for perceived increased risk. Egypt's second-largest state-bank, Banque Misr, has been talking to banks since June about a three year US$250m deal which is being coordinated by Bahrain's ABC Bank and has not yet signed. Banque du Caire has also has been in talks since July about a one-year US$200m deal which is being coordinated by Standard Chartered. Banque Misr and Banque du Caire were not immediately available for comment. Egypt re-entered the international syndicated loan market in January this year with a 42 month US$1.3bn pre-export loan for Egyptian General Petroleum Group.

The country took a four-year break from the international loan market after the Arab Spring uprisings in 2011. A handful of Egyptian corporates and banks have tapped the market this year, but those benchmarks are now being revised."Egypt has effectively been off the radar for several years. It is now an emerging market, benchmarks need to be established and borrowers need some hand-holding," a banker said. Deals that have been completed, which include a 37-month US$390m deal for National Bank of Egypt, have largely been funded by Middle Eastern banks. With low oil prices squeezing Middle East liquidity, negotiations with Egyptian borrowers have become tougher as lenders call for higher pricing.

"Egypt remains a very challenging place, not least because hopes of getting things done are pinned on Middle East liquidity," a second banker said. MAKING PROGRESS

Banque Misr is expected to be the first Egyptian bank to complete a deal since September's volatility. Talks stalled over pricing, but bankers said that some progress has been made in recent weeks and the deal is now likely to get done."They (Banque Misr) wanted the same pricing as National Bank of Egypt," a third banker said, adding that Bank of Egypt paid all-in pricing of 300bp for its loan. Banque du Caire is still in protracted discussions with lenders over the terms of its deal, bankers said. These problems have been exacerbated by Egyptian borrowers' previous absence from the loan market."Discussions with the borrower are very difficult, more difficult than the actual syndication," a fourth banker said. Although Egypt is proving challenging, bankers say they will still consider short-term loans for financial institutions in hard currency, but longer-dated, local currency loans are off the menu for now."The positive vibes around Egypt in the first quarter may have dissipated but lenders still believe it is an important market. There might be a slow down but it is not the end yet," said the fourth banker.

Miners struggle to fund tin projects, deeper shortages loom


* Many banks shun market after cartel collapse* Firms look at options such as end-user finance* Deficit due to deepen, threatens spike in price* Soaring prices could spur substitutionBy Eric OnstadLONDON, Dec 11 Companies seeking to build new tin mines are struggling to finance the projects, which could deepen shortages in a market that is already in deficit and exacerbate price moves that are already volatile. Financing any new mine has become difficult following the global financial crisis, but the situation in the tin sector is even worse. Many banks shun lending to tin projects due to its thin market after the collapse of a cartel in the 1980s. Prices may have to double to attract enough investment in new mines. But if the price soars out of control, consumers could be forced to find substitutes, leading to a boom-bust situation. Companies are looking at a range of creative options to fund the next generation of mines to extract the metal, which is mainly used for solder in the electronics industry and in coatings for cans and other packaging. Some are seeking money based on other products mined in the same project such as tungsten or iron ore, while others are trying to obtain financing from end-users who want to lock in a stream of supply."It's very tough for tin producers," said Peter Cook, chairman of Australia's biggest tin producer, Metals X."The real problem is tin is a commodity that has a very volatile price ... Any bank that finances a project likes to secure the cash flow," he said in an interview during a recent tin conference sponsored by industry group ITRI. Banks often require mining firms to hedge output to lock in future prices, but long-term hedging is impossible for tin, because futures for the metal on the London Metal Exchange (LME) only extend 15 months forward, compared with 123 months for copper and aluminium.

Another difficulty is weak share markets and low valuations of mining shares, which makes it difficult to raise money through equity issues."Some projects can actually get project finance from the banks, but the project won't go because they can't raise the equity component," Kasbah Resources Managing Director Wayne Bramwell said. END USERS Australia's Venture Minerals, which is developing the Mt. Lindsay tin/tungsten mine in Tasmania, expects tungsten to be the main driver for financing and may sell U.S. bonds."There are more creative ways of getting funding through off-take around tungsten, but tin I have less confidence in," Andrew Radonjic, its technical director, said. Kerry Heywood, chief executive of Tin International, a private company working on projects in eastern Germany, has been holding talks with European tin smelters that use scrap supplies but are interested in more stable feedstock from mines.

Kasbah Resources also has been holding talks with end-users. Most consumers have not been prepared to be the main sources of cash, but they probably hold the key to future funding, Bramwell said."We can see this security-of-supply issue already happening. The change will be driven by the end-users, reaching through the smelters and down into companies like our own to secure supply."Korea's Daewoo International has already made an investment in a tin project in Cameroon, Bramwell added. DEEPER DEFICITS The tin market is the only one of the six main industrial metals on the LME with a deficit forecast for 2013.

According to a poll of analysts by Reuters, its deficit is estimated to be 2,970 tonnes this year and widen to 4,189 tonnes in 2013. The shortfall could get deeper, because small-scale mining in locales such as China, Indonesia and Bolivia, which accounts for nearly 40 percent of global mine output, is expected to decline in coming years as easily accessible deposits run out. At the same time, few new bigger mines are due to launch production."There are many deposits but few real projects with economics that seem viable," John Sykes, director of Greenfields Research, said. Many new mines have low grades of ore, which hikes costs. At a grade of 0.5 percent, a typical open pit mine would need a price of $25,000 a tonne to just break even, and an underground operation would need about $40,000, ITRI said. Three-month tin on the LME has gained 18 percent since late October to around $23,000 a tonne but is still down about a third from a peak of $33,600 touched in April 2011. Peter Kettle of ITRI expects prices to reach $35,000 to $40,000 by 2015, a gain of 50 to 75 percent. A more bullish view comes from Mark Thompson, executive chairman of private firm Treliver Minerals, which is seeking to revive tin mining in Britain. He said prices would go as high as $100,000 per tonne due to the funding difficulties and resulting shortages, before settling at $40,000 to $60,000."Very few projects I look at, and I'm also on the board of Eurotin so I'm talking about our projects as well - none of these things work at $20,000, none of them are financeable," said Thompson, who co-founded Galena, the hedge fund arm of commodity trader Trafigura. Warren Hallam, managing director of Metals X, warned that the tin market could behave like the rare earths market, where prices skyrocketed on supply fears when China imposed export controls and then later tumbled."It'll always be subject to manipulation because it (tin) is the tiniest of all those markets. It's a miniscule market compared to the copper market," Hallam said. A spike in prices, however, could curb demand in the long run by spurring consumers to find alternatives, Kettle said."This is all still dependent on a continual growth in consumption of a couple percent a year. If the price does goes to $100,000 a tonne, then you will get a lot of substitution.