Row Over $500 Million Loan Facility May Delay Dabhol-Ii

A proposed $500 million loan facility for part-funding the second phase of Enron Corporation's 2,450-mw power project at Dabhol, Maharashtra, may get delayed as second-line banks, that were supposed to pick up nearly $250 million of the loan, are baulking over a clause in the deal.

The issue though supposed to close by December, is likely to be extended to June 1999, bankers said.

The contentious clause stipulates that the global lead arrangers have the first right to sell their individual loans.

Thus second-line banks, which are mostly foreign banks, cannot sell their loans till the lead banks sell.

This reduces avenues for these banks to pitch for other deals in the market.

Banks usually take a loan on their books for a short while before selling most of it to other banks.

For this, the selling bank has to part with a percentage of the syndication fee.

With the old loans out of their books it becomes much easier to pitch for fresh deals.

Of the $500 million, $250 million was to have been parked with the global lead arrangers _ ABN Amro, Credit Suisse First Boston and Bank of America. The remaining was to have been placed with the second line banks.

The reluctance of the second-line banks to pick up their part of the loan and the reduced role for Bank of America could delay the project till June 1999.

The second phase of the Dabhol project was scheduled to reach closure by December 1998.

A Dabhol Power Company spokesperson, however, said funding for the project was on schedule and there was no delay. Sources close to Enron said the company had looked at all possibilities.

As per the agreement reached with the Maharashtra State Electricity Board, Enron could extend the deadline for financial closure for the project could be extended to March 1999.

Enron is also looking at increasing the number of lead banks to five to reduce the exposure of individual banks.