Leading international bank Standard Chartered continues to play a pivotal role in supporting the fund-raising initiatives of the Omani government and various state-backed entities that in the past six months alone have resulted in financing deals totalling a hefty $12 billion.
Fund-raising efforts spearheaded by the global lender have led to the successful closure of, among other financing deals, the Omani government’s $5 billion international bond issue, and $2 billion sukuk issue, as well as project finance linked to the implementation of a pair of major midstream and petrochemical ventures.
The magnitude of this financing support, according to a high-level executive, is a demonstration of StanChart’s commitment to helping the Omani government and related entities tide over funding shortfalls stemming from the current low oil price environment.
“Standard Chartered Bank has been extremely active over the past couple of years in the institutional lending, infrastructure finance, project debt and corporate finance space, among other areas,” said Hussain al Yafai, Head of Global Banking in Oman.
“During the last six months of this year, Standard Chartered Oman has been involved in around $12 billion worth of financing for the government, its related entities and key projects. We expect to see more funding being announced over the next 6 to 12 months, which exemplifies our broader commitment to Oman, the local population, our workforce and the growth of our franchise in the Sultanate.”
Deficit budgets mean that the government and government-related entities (GREs) can no longer rely on equity cheques to fund infrastructure projects, according to Al Yafai. “They are now turning to innovative structures, involving capital markets, project finance, sale and leaseback arrangements, and so on — tools that StanChart has effectively harnessed to deliver effective and competitive financing solutions to our anchor government clients,” he said.
Besides serving as Mandated Lead Arrangers (MLA) and Bookrunners for the Omani government’s $5 billion international bond issue and $2 billion sukuk issue, StanChart was also MLA for wholly government owned Oman Oil Company’s $1.15 billion revolving credit facility (RCF).
Furthermore, in its capacity as Financial Advisers and Mandated Lead Arrangers, StanChart also supported the financing of the recently concluded Salalah LPG Extraction Project ($640 million debt) and ammonia expansion plant of Salalah Methanol Company ($727 million debt).
Significantly, financing commitments made by the bank during the first half of this year surpass those of last year by a sizable margin. “2016 was an active year as well, with StanChart participating in more than $7 billion worth of financing for the government and other GREs. We did transactions with the Ministry of Finance, and also supported Petroleum Development Oman (PDO) as Mandated Lead Arrangers for its $4 billion loan facility.”
Project finance is another segment of the market that has garnered keen interest from StanChart. “We have been very active in this space, having supported the financing of Independent Power and Water Projects in Oman. StanChart is also the structuring bank and MLA for the financing of the Sohar and Ibri Independent Power Projects (IPPs), currently under execution with a capital investment of around $1 billion apiece.”
Likewise, large family groups form a decent size of StanChart’s business in Oman, says the executive. “This is the time when we also see a lot of family groups that are well poised to expand, looking at distressed assets for possible acquisition. We are at the lower end of the actual cycle where you see a lot of distressed assets, with large family groups and to some extent pension funds, being the only ones in a position to pick up these assets.”
Following a revamp of its operations in Oman in line with a broader global strategy to focus on core competencies, StanChart exited from retail banking services in 2015. Its current focus is limited to corporate and SME banking space, the latter in keeping with CBO-mandated regulations requiring commercial banks to extend credit to small and medium businesses.
“We are very keen to support SMEs, but this is a space that needs to be specially monitored given the credit environment we are in,” said Al Yafai.
StanChart’s top executive in Oman is also keen to stress the lender’s unique position in the Sultanate as a collaborator alongside local Omani banks in meeting the diverse financing requirements of the local market.
“Contrary to misconception, we do not compete with local banks, rather we complement them. Local banks fall in a different kind of the banking space here in Oman. We do things that local banks cannot do and vice versa. They have a very strong Omani rial balance sheet, while we have very strong US dollar balance sheet coupled with a strong edge when it comes to technologies, know-how, top-of-the-pyramid expertise and advisory capabilities with regard to capital markets, project finance in value added things that go hand-in-hand with the local banking community. Consequently, we bid for certain projects in partnership with local banks.”
Also working in StanChart’s favour is its status as one of Oman’s international banks that continues to leverage its global network space to deliver competitive financing solutions to large corporates that have an international presence.
“In Oman, international clients bank with us not only in Oman but also across our network, which gives us a solid edge over banks that service such clients only in a limited jurisdiction.”
2017 marks 50 years of StanChart operations in the Sultanate.