Abu Dhabi National Energy Co, the state-run utility known as Taqa, and Emirates Telecommunications Corp are planning at least $12bn of loans as Dubai’s debt crisis ebbs amid a surge in Gulf economies.
Loans to companies in the Middle East rose to $33bn this year from $28.4bn in the same period of 2009, according to data compiled by Bloomberg. Average interest margins in the region fell to 2.5 percentage points from 3.5 percentage points last year, Bloomberg data show.
Shunned by lenders after Dubai World’s payment delay roiled global markets a year ago, Gulf borrowers are regaining access to credit. Dubai World, one of the emirate’s three main state- owned businesses, said Oct 27 it secured approval from all creditors to restructure $24.9bn of debt. State-owned Dubai Electricity & Water Authority sold $2bn of bonds last month and in September Dubai’s government raised $1.25bn in its first bond deal this year.
“The uncertainty factor that was surrounding the Middle East has neutralized,” said Umer Sultan, executive director of Europe, Middle East and Africa loan syndications at WestLB AG in London. “With the Dubai World restructuring nearly completed, with the capital markets opening up and people seeing that there’s appetite for the region among non-bank investors, lenders’ appetite is starting to grow.”
The economies of the six Gulf Corporation Council countries, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, are forecast to grow at an average rate of 5.7 percent in 2010, according to data compiled by Bloomberg. That compares with an average of 0.7 percent growth in the eurozone, European Commission forecasts show. Dubai’s bourse has surged 19 percent since the end of August to 1,764.54, making it the world’s third-best performer after benchmark gauges for Argentina and Peru.
“Compared to the European economies, the Middle Eastern economies are in growth mode,” said Raouf Jundi, head of loan origination, Middle East and Africa, at Bank of Tokyo-Mitsubishi UFJ Ltd in London.
Taqa, based in Abu Dhabi, said today it started syndicating $3 billion of three-and five-year loans to refinance an existing $3.15bn credit line. Bank of Tokyo-Mitsubishi UFJ Ltd., BNP Paribas SA, Citigroup Inc., HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Standard Chartered Plc are arranging the deal.
Emirates Telecom, known as Etisalat, plans to borrow more than $9bn to buy shares in Kuwaiti phone company Mobile Telecommunications Co, or Zain. The financing may take the form of a short-term bridge loan that will be replaced with longer- term financing, bankers familiar with the deal said Oct. 13.
Zain is also seeking a $1.5bn credit line of its own to refinance debt, while state-owned Saudi Arabian Oil Co. is in talks with banks to raise at least $3bn, according to people with knowledge of the deal.
“The Dubai restructuring helps the mood and, over the past year or so, banks have been able to distinguish between the strong credits and the weaker ones,” Jundi said.
International banks are still wary of companies in Dubai and likely to charge them higher interest margins, Jundi said. United Arab Chemical Carriers Ltd., a Dubai-based shipping company, signed $280 million of five-year loans in June with an interest margin of 3.25 percentage points over the London interbank offered rate, according to data compiled by Bloomberg. Libor is the rate banks charge to lend to each other.
“There are good companies in Dubai and sooner or later one of these will be able to tap” loans again, said Jundi. “They would have to pay a premium because of the situation surrounding Dubai.”
There is also some time to go before the market re-opens to private companies, Sultan said. Nearly all the larger Middle Eastern deals, including Qatar Telecom QSC’s $2bn loan and a $2.5bn credit line for Abu Dhabi’s Mubadala Development. Co, both signed in May, have been to government-owned or state- controlled companies.
“For a corporate name to come out into the international loan market and do a full-blown syndication, I think it’s still some time,” Sultan said.