Dubai: Abu Dhabi state-owned ADQ is in talks with banks for a loan of about $1 billion that would back its acquisition of a 45% stake in commodities trader Louis Dreyfus Co (LDC), three sources said.
ADQ said last week it had signed an agreement to acquire an indirect 45% equity stake in LDC, in what would be the first outside investment in the family-owned commodity merchant’s 169-year-old history.
ADQ has been in talks with a group of lenders including Abu Dhabi and European banks for a loan of up to around $1 billion to back the proposed acquisition, two of the sources said.
Discussions have revolved around the structure of the financing, with the company initially looking to raise the loan on a non-recourse basis, said the two sources.
ADQ did not immediately respond to a request for comment.
“It will most likely be a club loan as in events like these you don’t have the time for a syndication,” said the third source. Club loans are generally debt facilities provided by a select group of lenders with close ties to the borrower.
The acquisition price was not disclosed, but LDC said last week at least $800 million of the proceeds will go towards repaying a $1 billion loan LDC made to bail out Brazilian sugar firm Biosev, which is controlled by one of its holding firms.
One of the sources said typically a similar loan would cover 70% to 90% of the acquisition value.
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In its first-half results, LDC declared equity of $4.5 billion as of June 30, down from $4.8 billion on Dec. 31. At holding level, Louis Dreyfus Holding (LDH) in its 2019 financial filing reported total equity of $3.8 billion, down from $4.1 billion in 2018.
Abu Dhabi has increasingly used ADQ to consolidate strategic assets. The company owns Abu Dhabi Ports, Abu Dhabi Airport and bourse operator ADX. It has also built up a portfolio of food and agriculture businesses and recently took a 22% stake in Dubai-based courier Aramex.