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Bridge to the past

19 November 2008

Infrastructure plans for the Middle East are facing big problems. Sponsor risk-sharing, pricing and tenor expectations will need lowering even further for deals to get away in the new lending climate. Paul Smith reports.

"There is no market at the moment." One banker's statement on the Middle East project finance market, but a view shared by many. The syndication market is closed, and the notion of bank underwriting now exists in an inhospitable legal space between market flex and material adverse change clauses.

The stream of bad news has been continuous as the US sub-prime crisis turned global and most of the developed world grapples with recession and more potential damage from the onset of deflation. The Gulf Cooperation Council (GCC) nations were largely insulated from the initial effects of the credit crunch because of the buffer of high oil prices; however that buffer has been dramatically eroded as prices per barrel have fallen from $147 in July to around $55 a barrel late November.

The regions' equity markets have taken a pounding, with the Saudi exchange – the worst hit – falling 45%...

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