Dubai: The biggest non-oil industrial company in UAE, Emirates Global Aluminium has signed up for a revolving credit facility tied to a Term ‘Secured Overnight Funding Rate’ (SOFR). The new committed revolving credit facility provides EGA access to $137.5 million, with a term extended by 12 months. Participating banks include ADCB, Emirates NBD, and Commercial Bank of Dubai.
EGA’s financing is one of the first syndicated corporate credit facilities in the Middle East with Term SOFR as benchmark pricing, and uses the Chicago Mercantile Exchange’s SOFR forward rate. The transaction helps set up the market practice for use of Term SOFR in the region and by industrial companies elsewhere. SOFR is the emerging replacement to the US dollar London Interbank Offering Rate (Libor), which was the global lending benchmark for decades but recently became the subject of market manipulation accusations.
In a statement EGA’s Chief Financial Officer, Zouhir Regragui, said: “This is an example of how to manage the global transition to this new benchmark. The facility itself, like the one it replaces, will enable us to continue our robust and structured approach to managing our short-term working capital and liquidity position.”
SOFR provides a benchmark interest rate based on data from observable transactions, while Libor relied on disclosures from a panel of selected banks. EGA retains $737.5 million of committed revolving credit facilities.