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Borse Dubai pioneers financing revival
Borse Dubai Ltd may be the emi rate's first state-owned company to tap banks to refinance a multibillion-dollar loan since September, a sign interest rates have returned to levels companies are willing to accept.
- Bloomberg
- Published: 23:38 January 8, 2009
- New site is set out for construction in Dubai.
- Image Credit: Francois Nel/Gulf News
Dubai: Borse Dubai Ltd may be the emi rate's first state-owned company to tap banks to refinance a multibillion-dollar loan since September, a sign interest rates have returned to levels companies are willing to accept.
Borse Dubai, the owner of Nasdaq Dubai, is seeking a $2.5 billion (Dh9.19 billion) loan this month, according to bankers close to the talks who declined to be identified because the negotiations are private.
It needs to replace a one-year syndicated loan taken out last year to pay for the purchase of Swedish exchange OMX AB.
"We're very optimistic," said Huda Bu Humaid, Borse Dubai's spokeswoman in Dubai. "But we don't want to disclose the nature of our negotiations with banks at this point."
Dubai's biggest companies have refused to refinance their maturing loans in the past two months as lenders raised margins after the global credit crunch reduced appetite for lending in a region hit by falling real estate prices.
Investment Corp. of Dubai borrowed $6 billion in September, marking the last regional deal over $1 billion.
The largest state-owned companies in the UAE have $20 billion of debt due this year, according to a Merrill Lynch & Co report from October.
Dubai borrowed to build the world's tallest tower, create palm tree-shaped islands and buy stakes in banks worldwide to become a financial and tourist hub.
Borse Dubai raised $4.2 billion last year to fund its OMX takeover and borrowed £796 million ($1.2 billion, Dh4.21 billion) to buy a stake in London Stock Exchange Group Ltd.
"The market has been trying to open up," said Luis Costa, an emerging-markets debt strategist at Commerzbank AG in London.
"The market is now much more benign to sovereign credits and to companies linked to sovereigns. I wouldn't be surprised to see some deals coming to the market in the next few weeks."
Borse Dubai is likely to close the deal at between 7.5 per cent and eight per cent if it seeks a two-year loan and between 8.5 per cent and nine per cent for a three-year refinancing, according to Costa. His estimates are factoring in the current pricing of credit- default swaps based on Dubai's debt.
The original one-year loan paid more than one percentage point over the London interbank offered rate (Libor).
Banks had been toughening terms for all borrowers following more than $1 trillion in writedowns and losses worldwide. Since November, at least three state-owned companies repaid their loans using their own resources to avoid setting higher price benchmarks.
Dubai World repaid a $1.2 billion loan last month, saying the cost of refinancing was "uncompetitive".
Dubai Holding Commercial Operations Group LLC, a company owned by Dubai Government, said on November 26 it repaid $650 million in maturing Eurobonds and bank loans from its internal cash flow.
DIFC Investments LLC, a unit of state-owned Dubai International Financial Centre, said on December 2 it repaid a $500 million loan due to mature on December 5.
HSBC Holdings Plc is leading a group of lenders to arrange the syndication for Borse Dubai, according to the bankers. HSBC spokesman Tim Harrison in Dubai declined to comment.
The perceived risk of Dubai companies as measured by default swaps is falling.
Credit-default swap contracts covering the debt of DP World Ltd, the world's fourth-biggest port operator and owned by Dubai, were last quoted at 760 basis points yesterday, according to CMA Datavision prices. That compares with 900 basis points in October.
The decrease signals an improvement in the perception of credit quality, while a basis point on a swap contract protecting $10 million of debt for five years is equivalent to $1,000 a year.
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