Dubai's DIFC investment gets $1.04 billion loan to repay Islamic bond

Dubai’s DIFC investment gets $1.04 billion loan to repay Islamic bond

DIFC Investments signs $1.04 billion loan to fund sukuk repayment; Dual-tranched loan priced at 380 bps over LIBOR; Timely sukuk repayment helps rebuild Dubai's investor image

June 4, 2012 11:06 by Reuters

DIFC Investments, a unit of the firm running Dubai’s financial free zone, has secured a $1.04 billion loan to help repay in full its Islamic bond maturing later this month, reinforcing the emirate’s ability to meet its bond obligations.

The five-year, syndicated loan facility is priced at 380 basis points over the London Interbank Offered Rate (LIBOR) and is mainly secured on the investment firm’s property assets, a statement filed to the Nasdaq Dubai bourse showed.

DIFCI, whose $1.25 billion Islamic bond maturing on June 13, was seen as a challenging maturity for the emirate will be repaid in full with the proceeds from the loan, the company said.

The sukuk, along with a $2 billion bond maturity at state-owned firm Jebel Ali Free Zone (JAFZA), has been highlighted by analysts as one of the most challenging refinancings in the Gulf Arab region this year.

Emirates NBD, Dubai’s largest lender, Standard Chartered, Dubai Islamic Bank and Noor Islamic Bank arranged the deal. Moelis & Co acted as financial advisor to DIFCI.

The loan has a shortfall guarantee from the Dubai government which covers nearly half the loan’s amount, two sources told Reuters last week. The statement did not mention the guarantee.

DIFCI’s potential payment of the $1.25 billion sukuk will support Dubai’s bid to rebuild its credibility with investors who fled the region after state-owned conglomerate Dubai World shook markets in 2009 with plans for a $25 billion debt restructuring.

The glitzy emirate has never defaulted on its bond obligations and most of its restructuring deals have been secured by agreeing with banks on extending maturities.

Dubai also raised $1.25 billion from a sovereign Islamic bond earlier in April.

JAFZA picked seven banks to arrange a new Islamic bond, lead managers said on Friday, with at least $500 million likely to be raised to part-repay the firm’s $2 billion sukuk obligation.

It has ruled out any need for government support to meet its debt obligation.

DIFC Investments, whose assets range from aerospace to retail, made a net profit of $130.5 million last year compared with a net loss of $272 million in the previous year, after the impact of discontinued operations.

(Reporting by Dinesh Nair, Mirna Sleiman; Editing by David French)