Societe Generale Sees Export Credit Boosting Middle East Lending

(Bloomberg) -- Middle East borrowers are increasingly using loans backed by export credit agencies to fund projects as tightening liquidity makes conventional borrowing more expensive and difficult to secure, according to Societe Generale SA.

France’s second-largest bank by market value is in talks with governments, state-owned and private companies for about twelve loans backed by ECAs for projects including in the energy and oil industries in the Middle East, Richad Soundardjee, regional chief executive officer, said in an interview in Dubai on Tuesday. The lender more than doubled the number of ECA-backed loans it helped raise last year, compared with 2015, he said, without revealing the number of loans.

"ECA is one of the big ways that will really help the region meet the increased need for external funding," Soundardjee said. "You can raise very large loans, you can achieve very competitive pricing, very often even cheaper than bonds and it is a fairly flexible tool."

Middle East borrowers are seeking alternative sources of financing as costs climb. Low oil prices have slowed deposit growth at banks, limiting the amount of cash available for loans. The three-month Saudi Interbank Offered Rate, a benchmark used to price loans, hit a seven-year high in October, while the rate in the United Arab Emirates hit a four-year peak last year. Export credit agencies are private or quasi-governmental institutions that act as an intermediary between national governments and exporters to issue export financing.  

Middle East Expansion

Societe Generale helped arrange a $227 million loan for Oman Shipping Co. earlier this month, part of which was a 12-year ECA facility. The bank is also the financial adviser to Egypt’s $5.9 billion Tahrir Petrochemicals project, which is expected to receive ECA-backed funding.

Societe Generale expanded its Middle East structured finance team in 2015 to tap regional demand for funding and advisory services for industrial, transport and energy projects. It added specialists in project and export finance, asset financing for aircraft, in shipping and debt capital markets in Dubai, Soundardjee said at the time.

The French bank was the eleventh-biggest provider of syndicated loans in six-nation Gulf Cooperation Council last year in a list topped by HSBC Holdings Plc and Mitsubishi UJF Financial Group Inc., according to data compiled by Bloomberg. It ranked 25th among arranger of bond sales in the region, the data shows.

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

To contact the editors responsible for this story: Tim Barwell at tbarwell@bloomberg.net, Stefania Bianchi, Vernon Wessels