Kuwait's EQUATE Petrochemical Co is in talks with banks to refinance a $6 billion bridge loan that it secured last year and was partly used to fund the acquisition of petrochemical company MEGlobal, sources with knowledge of the matter said on Sunday.
The venture between Dow Chemical and Petrochemical Industries Co (PIC) of Kuwait is seeking funds split into portions of three years and five years, the sources said on condition of anonymity as the information is not public.
One source, a Gulf-based banker, added the first tranche would be structured as a revolving credit facility and the second as a term loan.
Kuwait's finances have been hit by a slump in oil prices. This has squeezed banking system liquidity, forcing government and quasi-sovereign entities to scramble for financing ahead of possible U.S. interest rate hikes in the coming months.
EQUATE's loan would facilitate the exit of Dow from some of its ventures in Kuwait; the sale of ME Global is part of Dow's bigger plan to optimise ownership in its Kuwait operations.
EQUATE originally raised a $6 billion bridge loan in December to buy MEGlobal from Dow and PIC, part of state-run Kuwait Petroleum, for $3.2 billion, and to refinance some of EQUATE's existing debt. The loan is due to mature in December 2016 although it has an option to be extended for six months.
EQUATE is taking indications from local and international banks for bullet as well as amortising loans, the Gulf-based banker and a second source said.
In a bullet loan, the principal is repaid at the end of the term, while in an amortising structure, the borrower repays parts of the loan throughout the duration.
The current bridge loan was arranged by banks including JP Morgan, Citigroup, HSBC, Kuwait Finance House and National Bank of Kuwait.
Established in 1995, EQUATE operates an integrated manufacturing facility producing more than 5 million tonnes annually of petrochemical products, including polyethylene and ethylene, that are marketed throughout the Middle East, Asia, Africa and Europe.