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RLPC-UPDATE 1-Dubai's ICD agrees $2.8 billion loan
May 5, 2011 / 6:05 PM / 7 years ago

RLPC-UPDATE 1-Dubai's ICD agrees $2.8 billion loan

* First large Dubai loan launched since debt crisis

* ICD’s loan pricing more than doubled since 2008

* Aims to close deal by June 8

(Adds fees, commitment sizes, quote, background and detail)

By Tessa Walsh and Michelle Meineke

LONDON, May 5 (Reuters) - Dubai’s sovereign wealth fund ICD launched a $2.8 billion, five-year loan refinancing on Thursday which is the largest loan to emerge from Dubai since its financial crisis, banking sources said.

Citigroup, Emirates Bank and HSBC Bank have been appointed to co-ordinate a conventional tranche and Dubai Islamic Bank and Standard Chartered are leading an Islamic tranche.

ICD could not immediately be reached for comment.

ICD faces a significant hike on its borrowing costs of 125-150 basis points (b.p.) on an existing $6 billion loan due to Dubai’s debt troubles and political instability in the Middle East.

The new loan will be priced at 350 b.p. and lenders will also receive a 100 b.p. participation fee and a 100 b.p. structuring fee.

The fees bring the all-in return on the loan to around 390 b.p. over five years -- close to Dubai’s current credit default swap rate, a senior banker close to the deal said.

Banks are being asked to commit $233 million each for a mandated lead arranger title and have been asked to respond by May 25, with a view to closing the deal by June 8, he added.

“There seems to be a fair momentum to approach banks and get this formalised by the end of the month,” the senior banker said.

LOAN SIZE REDUCED

ICD asked 10-12 banks to submit proposals for a $4 billion loan in March. [ID:.nLDE72A1TM]

ICD repaid $1.2 billion of the original $4 billion total using some of the $3.5 billion cash on its balance sheet, the senior banker said.

The $6 billion loan that is being refinanced was taken out in August 2008 and was split between a $3.75 billion conventional financing and a $2.25 billion Islamic financing.

That loan was completed on a club basis in September 2008 with a small group of 10-12 banks after liquidity drained from the market after the collapse of Lehman Brothers.

ICD unexpectedly drew down the $6 billion loan in September 2008 to give it emergency liquidity. The loan had originally been earmarked as an acquisition warchest.

The funds were placed on deposit with Emirates Bank, a senior banker said, and up to $2.3 billion of the loan was used to help Borse Dubai refinance a loan in February 2009.

(Editing by Jane Merriman)

tessa.walsh@reuters.com; +44 20 7542 4048; Reuters Messaging: tessa.walsh.reuters.com@reuters.net

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