LONDON, Nov 13 (Reuters) - Spanish utility Gas Natural is discussing a further reduction to the 18.5 billion euro ($23.11 billion) loan backing its acquisition of a majority stake in Union Fenosa as the push to sell the deal continues in difficult loan market conditions, banking sources said on Thursday.
The loan was reduced by 500 million euros to 18.5 billion euros in October. Negotiations have been held this week about another reduction of a similar amount, two bankers close to the deal said, adding that nothing has yet been formally agreed.
The initial 500 million euro reduction trimmed an existing 3.5 billion euro five-year tranche to 3 billion euros, both bankers said. Any further cuts are also likely to be applied to the longer-dated five-year tranche, they added.
Gas Natural declined to comment.
Syndication of the loan was initially launched in early September, before Lehman Brothers' collapse brought the syndicated loan market to a virtual standstill.
The loan's interest margins were increased by 25 basis points across the facility in late October in a bid to revive sell-down of the loan.
The changes have boosted uptake of the facility, bankers said, and more commitments have been received since they were made.
After October's margin increase and size reduction, the loan consists of a six billion euro, one-year tranche and a six billion euro one-year tranche with a one-year extension option, both of which pay 150 basis points (bps) over EURIBOR.
The deal also includes a 3.5 billion euro, three-year tranche paying 175 bps, and a three billion euro, five-year tranche paying 195 bps.
The loan has been fully underwritten by mandated lead arrangers Barclays, BNP Paribas, Caja Madrid, Citigroup, ING, La Caixa, Royal Bank of Scotland, Santander, Societe Generale and UBS.
(Reporting by Zaida Espana and Tessa Walsh; Editing by David Cowell) ($1=.8006 Euro) Keywords: GAS NATURAL LOAN/

(tessa.walsh@reuters.com; +44 20 7542 4048; Reuters Messaging: tessa.walsh.reuters.com@reuters.net)

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