Citigroup Sees MENA Syndicated Loans at More Than $70 Billion

(Bloomberg) -- The resurgence in syndicated loans in the Middle East and North Africa seems set for a slowdown as the deal pipeline dries up, according to Citigroup Inc.

Loans in the region have surged 85 percent in 2018 to $33.4 billion, helped by a jumbo $16 billion issue from Saudi Arabia, according to data compiled by Bloomberg. Overall volume will probably climb to more than $70 billion, according to Zain Zaidi, a director for loans and acquisition finance at Citigroup, the region's biggest loan arranger. Syndicated loans in MENA fell 30 percent in 2017 to $82.9 billion.

On top of the loans already done this year, “there is at least another $8 billion to $10 billion of deals either in the market, or very sure of coming to the market right now,'' Zaidi said in an interview at his office in the Dubai International Financial Centre. “Looking out at the rest of the year, there is probably some pipeline out of Saudi, there is some pipeline from U.A.E. real estate. Beyond that, there is nothing firm, there are a couple of situations in Egypt.”

Syndicated loans in the oil-producing MENA region dropped sharply last year as governments and companies cut back on projects amid low crude prices and slowing economic growth. MENA syndicated-loan volumes also fell below bond sales for the first time in years as large borrowers preferred to sell bonds to avoid straining local bank liquidity.

Zaidi also said:

• Lot of discussions underway around mergers and acquisitions, which is “always hit or miss”
• “If you see any significant M&A, which could be large, that could move volume closer to the levels of 2015, 2016,” when volume climbed to over $100 billion
• M&A dialog is higher than last year as “valuations are at pretty significant multiples” and financing is cheap
• “As oil prices fell, no one was making any capital expenditure or acquisitions. Now, from governments down, everyone's liquidity positions are much better.” Liquidity is high and banks are chasing assets
• “Over the last couple of years, borrowers have been building up their cash positions, not been making major investments either on capex or M&A. So borrowing needs have been limited”
• Loan pricing is “creeping down; I don't know that it can go much lower, but it's certainly inching down”
• Qatari financial institutions have re-opened that market with transactions from QNB, QIB and CBQ. There were no deals last year from Qatar after the diplomatic standoff in June
• The syndicated-loans market has been dominated by few international banks this year, “some of this will normalize over the rest of the year;” a number of bridge loans this year for Sabic, SEC, Taqa “are priced very tightly and not necessarily the best fit for some of the Middle East banks”

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net.

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Robert Brand

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