Aluminium Bahrain seeks rating ahead of $3.5 bln project fundraising

Aluminium Bahrain (Alba), owner of one of the world's largest smelters of the lightweight metal, is seeking a credit rating ahead of talks with banks about fundraising for its $3.5 billion Line 6 expansion, a company official to the media.

Alba in June secured government approval for a larger-than-planned expansion of its proposed sixth "potline", or facility in which aluminium is made, which would boost annual output by 514,000 tonnes to 1.45 million tonnes. The company was considering a range of options to fund the scheme, including loans, export credit agency finance and a capital markets transaction.

"We will be looking at the funding mix in conversations with our financial advisers, but no decisions have yet been made on how this important project for Alba and Bahrain will be financed," said the official. JP Morgan, Gulf International Bank and National Bank of Bahrain are the project's financial advisers, according to the June announcement.

Before any decisions are made, a credit rating would be sought. Adding this process would take five to six weeks once it started and the rating would be secured before the end of the year. Getting a credit rating is often regarded as an important step before approaching capital markets, and one of the banking sources said a bond or sukuk could be issued before the end of the year or early in 2016, depending on the progress of funding talks with banks and on market conditions.

Traditionally in the Middle East, the total project cost is met with a combination of cash provided by the scheme's instigator and debt raised from the market, with between 20 percent and 30 percent coming from the company; but what is likely going to be the debt-to-equity split on Alba's financing.

Construction of the project, which will make Alba the largest single-site aluminium smelter in the world, is expected to start in 2016 and production to begin in 2019, it said in June.

The aluminium industry contributes around 10 percent of Bahrain's GDP, with the sector growing in importance to the kingdom while oil prices remain subdued.

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