Qatar Telecom (Qtel), the leading telecom services provider in Qatar, is signing a group of senior banks into a $2 billion loan that will reduce its borrowing costs, banking sources said.

Qtel is refinancing a $2 billion forward start loan agreed in September, said a report in our sister publication, the Gulf Daily News.

Refinancing a growing trend among borrowers keen to replace forward start deals signed last year following a dramatic reduction in pricing for highly rated companies in Europe and, to a lesser extent, the Gulf.

Forward start loans were popular last year for companies facing maturing loans, as they enabled borrowers to extend the deals in return for a hefty increase in pricing on the existing credit. However, in light of falling margins, they are now looking expensive.

The new deal is split between a $1.25 billion, three-year tranche that pays a fully drawn margin of 125 basis points (bps) over Libor and a $750 million, five-year tranche that pays a fully drawn margin of 155 bps, the bankers said.

That compares with a margin of 250 bps over Libor on last year's $2bn forward start loan and 22.5 bps over Libor for the original three-year, $2 billion revolving credit facility agreed in November 2006.

Initial mandated lead arrangers and bookrunners on the new loan are BNP Paribas, DBS, Qatar National Bank, Societe Generale and Royal Bank of Scotland, the banker added.

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