Foreign banks look to reduce Tamar exposure

HSBC and Barclays sought to transfer short-term debt to Israeli institutions.

Sources inform ''Globes'' that foreign banks that are financing Delek Group Ltd. (TASE: DLEKG) and Dor Alon Energy Exploration Ltd's share in the development of the Tamar natural gas field recently approached Israeli financial institutions to buy the banks' short-term financing for the project.

HSBC Holdings plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC) and Barclays Bank plc (LSE: BARC) committed to lending $330 million in equal shares to the companies for Tamar development. The loan agreement was signed in late June. By approaching Israeli financial institutions, the banks may be signaling that the project's level of risk is higher than they initially estimated, and that they are seeking to limit their exposure, or even to abandon the project altogether.

Alternatively, HSBC and Barclays may see a business opportunity. This seems unlikely, given the short time since the loan agreement was signed. The wish to reduce exposure to Tamar may be related to the pending publication of the Sheshinski committee report on royalties on oil and gas discoveries. The committee will reportedly include the Tamar field in the list of fields whose tax levy will substantially increase. These reports have already put a degree of uncertainty about the $3 billion Tamar development project.

Delek Group Ltd. (TASE: DLEKG) subsidiaries Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) each own 15.625% of Tamar, and Alon Israel Oil Company Ltd. unit Dor Alon Energy owns 4%. Their combined share in the cost of developing Tamar is around $1 billion.

In June, the companies signed an agreement with Barclays and HSBC for a $430 bridge loan. An agreement of the rest of the project financing is due to be signed later. Last month, Barclays and HSBC brought in to the syndicate Israel Discount Bank (TASE: DSCT), Bank Leumi (TASE: LUMI), and Mizrahi Tefahot Bank (TASE:MZTF), which together provided $100 million of the bridge loan.

Barclays and HSBC both said, "The bank is very satisfied with the Tamar deal, and therefore agreed to fully underwrite the deal. As is normal in these types of deals, the bank decided to bring in several other banks and institutions while retaining part of the credit."

Tamar's other partners are Noble Energy Inc. (NYSE: NBL), with a 36% stake, and Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), with 28.7%. Isramco is in talks with Deutsche Bank AG (NYSE: DB; XETRA: DBK) for financing for the Tamar development. These talks were postponed for a second time yesterday.

Published by Globes [online], Israel business news - - on November 3, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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