Bankers in Dubai and London confirmed that DIC had clinched the roughly two-year loan from a syndicate of lenders. DIC is an investment arm of Dubai Holding, and owns a number of well-known assets abroad, including a majority stake in Travelodge hotel chain of the UK. DIC executives could not be immediately reached to comment on the deal.
Governments and corporations around the world have quickly seize the opportunity to borrow at lower rates, including Abu Dhabi, which has sold at least $9.35bn in bonds so far this year. Now Dubai has sent representatives to Asia to assess investor appetite for lending more money to its companies, which owe an estimated $65bn.
Dubai does not publish accounts of what it and the companies it controls owe, but analysts estimate that Dubai Inc will need to repay $6.8bn between now and the end of the year. Next year, it will need to come up with another $10.1bn. It will need $12.1bn in 2011, $15.2bn in 2012 and $4.8bn in 2013.
Much of the amount owed this year is from a $3.52bn bond from Nakheel, the property company, which matures on December 14. Before that, on November 2, DIC is due to repay a comparatively small $600m in bank loans.
Analysts consider Dubai Holding one of the better run of Dubai’s three sovereign wealth funds. The company recently repaid $250m it owed to BNP Paribas and this month repaid $300m that came due at one of its property divisions, Sama Dubai.
“Dubai Holding is well run and has high liquidity,” said Farouk Soussa, the head of sovereign ratings at Standard & Poor’s in Dubai, which has placed an “A” rating on the debt of Dubai Holding Commercial Operations Group.
In spite of its cash position, Dubai Holding has joined Dubai World in embarking on a major restructuring of its operations, merging its property divisions and announcing plans to combine DIC with another investment arm, Dubai Group.
Dubai World, which owns Nakheel, announced last week a restructuring that it said eliminated 12,000 jobs and would save it $800m over three years. Dubai World has an estimated $5.5bn in debt, while its subsidiaries owe another $18.77bn.
Dubai Holding owes at least $2.44bn, according to analyst estimates.
It has guaranteed DIC’s new loan, according to a report by Reuters citing unnamed sources.
The new loan refinances a bridge loan the company borrowed in August, Reuters reported, and was underwritten by Mashreqbank, Royal Bank of Scotland and Noor Islamic Bank, which is partly owned by Dubai Holding.
The syndication is due to close on November 12.
The loan is due to mature in August 2011, the Reuters report said, but gives bankers the option to extend it for another year in return for an additional percentage point in interest.
The loan is paying 4 percentage points over the benchmark interbank rate. In the event of repayment, the report said, lenders would be given shares of a special purpose vehicle holding DIC’s stake in Travelodge and KEF Holdings.
* with additional reporting by Uta Harnischfeger
warnold@thenational.ae
