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Borse Dubai Refinances $3.8 Billion Loan.

Summary: DUBAI - In a watershed loan refinancing deal, Borse Dubai Limited has raised $2.5 billion from a group of foreign and local banks and investors.

The deal, analysts said, was likely to put to rest persistent speculation about the financial health of Dubai AEs state-linked companies and commitment to their debt obligations.

In a statement issued on Thursday, Borse Dubai said that it had successfully signed a $2.5 billion Term Loan Facility to refinance the aggregate $3.8 billion Term Loan and Guarantee Facility used to fund investments into NASDAQ OMX Group and the London Stock Exchange.

oWe are pleased to have successfully concluded this transaction which, despite the difficult market conditions, found support amongst a geographically diverse group of investors,o said Essa Kazim, Chairman, Borse Dubai.

The statement said the multicurrency syndicated facility matures in one year and carries a one-year extension option, at the discretion of Borse Dubai. The facility has a conventional and Islamic tranche, and pays 325 basis points a year over the London interbank offered rate (Libor), it added.

Borse Dubai, which is a holding company established in August 2007 to consolidate Dubai governmentAEs interests in Dubai Financial Market and NASDAQ Dubai (formerly DIFX), said the participating banks included Bank of Baroda, Dubai Islamic Bank, Emirates Bank International, HSBC Bank, Industrial and Commercial Bank of China (Asia) , ING Bank, London Aa branch, Intesa Sanpaolo, Dubai branch, National Bank of Abu Dhabi, Skandinaviska Enskilda Banken AB, The Bank of Tokyo-Mitsubishi UFJ, Aa and Union National Bank, the majority of which are existing Borse Dubai lenders. Analysts said the successful bid to refinance the loan maturing this month would help ease worries about the emirateAEs ability to meet its debt obligations, estimated at around $15 billion for this year.

oThe refinancing has been very important in setting a precedent going forward that government assistance will be provided as and when needed,o said Fahd Iqbal, vice president of EFG-Hermes Research.

With the deal in place, Dubai has passed a crucial test of its resolve not to default on it loans, analysts said. The move would boost investor confidence, they said.

oCertainly this is a positive development. Talks that state-run banks helped (to raise the full amount) have allayed fears of investors about debt-repaying capacity of Dubai to some extent,o said Faisal Hasan, head of research at Kuwait-based Global Investment House.

Dubai AEs trade and services dependent economy has been hit hard by the global financial crisis and its once booming property sector is facing a slowdown.

MoodyAEs Investors Service had estimated that the total corporate debt in the Gulf region reached some $20.4 billion last year, heavily concentrated among government-related issuers.

UAE issuers made up to 90 per cent of the total outstanding debt, with Dubai alone representing 51 per cent and Abu Dhabi , 39 per cent.

Borse DubaiAEs feat triggered a strong relief rally in both the local credit and the equity markets on Thursday with Dubai bourseAEs benchmark index posting it biggest one-day gain in three months, ending up 5.4 per cent. Reuters reported from London that the cost of insuring Dubai AEs debt in the credit default swaps market fell 50 basis points after news of the refinancing deal, which was seen by foreign investors as an acid test of Dubai IncAEs ability to refinance its own debt.

oThe achievement of Borse Dubai has clearly helped in improving sentiment. There are still concerns about Dubai defaulting on its debts, but for now that thought is out,o said Luis Costa, debt strategist at Commerzbank AG in London .

Costa said that to a certain extent, the loan deal might have opened the gateway for banks to start looking again at UAE, especially Dubai .

oThe syndicate of banks included new participants and could be an indication that a certain degree of confidence is there.o

Iqbal of EFG-Hermes said sentiment will further improve if Borse Dubai and other state enterprises choose to be more transparent about the status of their obligations.

oWe believe some uncertainty will remain until greater clarity and disclosure is provided on the Dubai governmentAEs finances and the financial positions of some of the borrowing entities.o

With investors now eliminating the possibility of Dubai going under, othere is no doubt that Dubai will be able to weather the storm and navigate through the crisis,o said Rami Sidani, head of Aa investments-MENA at Schroder Investment Management Limited.

rocel@khaleejtimes.com

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Publication:Khaleej Times (Dubai, United Arab Emirates)
Geographic Code:7UNIT
Date:Feb 21, 2009
Words:759
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