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Saturday, April 20, 2024

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Case study: nogaholding’s standby facility for its Islamic sustainability-linked financing

nogaholding, a semi-independent agency under Bahrain’s Ministry of Oil and Gas, secured a US$200 million syndicated Islamic standby facility to supplement its US$2.2 billion Islamic sustainability-linked facility obtained in May 2022.

The Murabahah-based standby syndicated facility was led by Al Baraka Islamic Bank and includes Bahrain Islamic Bank, Khaleej Commercial Bank and the National Bank of Kuwait-Bahrain as financiers.

In the middle of last year, nogaholding obtained a refinancing for its US$1.6 billion Murabahah facility, upsizing it to a dual tranche US$2.2 billion sustainability-linked facility due to the syndication being oversubscribed. The facility was touted as the largest sustainability loan in Bahrain and the Middle East.

“The Shariah compliant standby facility is in this case intended to supplement and complement that [previous sustainability-linked] term financing,” Elias Moubarak, a partner in the international banking and finance practice at Trowers & Hamlins, told ISFI.

According to Elias, the financiers and nogaholding took the view that Murabahah was an optimal structure for a standby facility as it permitted the financing to be structured in a Shariah compliant manner with the added benefit of allowing nogaholding to draw down on the facility on short notice using the sale and purchase of readily available assets to generate Shariah compliant cash flows.

Due to nogaholding’s status as a government-linked entity, additional consideration was given with regard to its capacity and authority to enter into the relevant transaction documents as well as the scope of representations and warranties, undertakings and relevant events of default.

“The Islamic transaction agreements were negotiated to take into account the specific credit and compliance requirements of the financiers, whilst providing sufficient flexibility around certain covenants to enable nogaholding to perform its mandated roles,” Elias added.

As a result of these added considerations, Elias shared that even though most of the transaction documents were prepared based on the Loan Market Association’s standard form of documents, certain terms remain bespoke.

nogaholding’s US$200 million Standby Facility

US$20 million


28th January 2023
Summary of terms and conditions
Aggragate principal amount
US$200 million
Type of facility
Standby facility
Structure
Murabahah
Use of proceeds
To finance the general funding requirements of nogaholding
Tenor
Five years
Profit rate/ yield
2% per annum + term secured overnight financing rate
Repayment
Payment of deferred sale price at end of each profit period
Frequency of payment
Every one month, three months, six months, nine months or 12 months, as specified in the relevant offer letter
Legal advisor
• Trowers & Hamlins as transaction counsel for the finance parties
• Linklaters as transaction counsel for nogaholding
• Newton Legal as Bahraini counsel for nogaholding
Governing law
Bahraini law

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