| Kippreport.com

Dubai’s Emaar Properties, the emirate’s largest real estate developer, has put up its crown jewel asset — Dubai Mall — to secure $1 billion of lending to help refinance upcoming debt amid difficult funding conditions.

The two-tranche facility, which consists of both sharia-compliant and conventional funding, is split between a five-year tranche and an eight-year amortising loan and is backed by its mammoth Dubai Mall, the company said in a statement on Monday.

Dubai Islamic Bank, National Bank of Abu Dhabi and Standard Chartered are providing the finance, which carries a margin of 350 basis points and will be initially used to repay an existing $300 million facility taken out in 2010, Emaar said.

“These days no one will lend without a collateral and borrowing costs are going up,” said an Abu Dhabi-based real estate analyst, who did not wish to be identified. “They are getting a favourable rate as they put this asset as collateral.”

Dubai Mall, one of the world’s largest malls, with an indoor Olympic-sized ice skating rink and a two-storey high aquarium, was the last debt-free asset which Emaar had on its books, the analyst added.

The use of the mall was the key behind getting the deal done, a banker with knowledge of proceedings said.

“Emaar is a strong credit, and Dubai Mall is its crown jewel,” he said. “There’s so much cash coming out of it, which provides the whole rationale for the deal.”

MEETING NEAR-TERM MATURITIES
Sources told Reuters in September that the developer was in the process of raising around $800 million through a two-tranche loan which was backed by four malls, including Dubai Mall.

“Emaar was initially looking for $1 billion but one of the banks wasn’t that comfortable going that far because of their existing exposure to the company,” a separate banking source said.

“$200 million isn’t a big amount though so they obviously found a way of doing it amongst themselves,” he added.

The new facility will benefit the company by extending its debt maturity profile and reducing the cost of its borrowing, the statement added.

Emaar has been taking steps this year to meet its near-term debt maturities, extending part of a $1 billion facility due to expire in February 2012 until May 2014 through the signing of a $700 million sharia-compliant forward start facility in May.

A forward-start facility is a loan provided by an group of lenders that agree to provide new funding upon the maturity of an existing loan. Not all members of the existing lending group are required to join up under a forward start.

Emaar has about 3.75 billion dirhams ($1.02 billion) in debt maturing within one year, the majority of which is in the first half of 2012, the analyst said.

Emaar’s shares finished 2.3 percent down at 2.56 dirhams on Monday, with the funding announcement coming after the Dubai Financial Market had closed. ($1 = 3.6730 UAE dirhams) (By David French; Additional reporting by Praveen Menon; Editing by Amran Abocar, Editing by Mark Potter)