State-owned Investment Corporation of Dubai (ICD) has provided up to $2.3 billion of the $3.4 billion Borse Dubai needs to refinance an existing syndicated loan, banking sources close to the deal said on Thursday.
Borse Dubai closed a $2.5 billion loan on Wednesday, which together with a $1 billion equity injection from shareholders including ICD, allayed fears that Borse Dubai would default on its debt. [ID:nLI495825]
Only $1.2 billion of the $2.5 billion was raised from international banks, sources said, leaving about $1.3 billion, which was provided by state-owned Dubai banks after ICD deposited cash with them, the sources said.
ICD used the proceeds of its own $6 billion syndicated loan, agreed in November, to meet the $1.3 billion loan payment and the $1 billion equity injection, two of the sources said.
Borse Dubai is the first Dubai government entity to tap the loan market this year in order to refinance foreign debt.
Despite the successful outcome for the loan, syndication was hit by foreign banks retreating from Dubai to their domestic markets, the sources said, adding that the banks will not return anytime soon.
"This has postponed the problem and not solved it," a banker close to the deal said.
HSBC (HSBA.L), which coordinated the deal, provided $250 million to the loan, while Emirates Bank ENBD.DU and Dubai Islamic Bank committed $800 million each after receiving capital from ICD, and Bank of Tokyo Mitsubishi-UFJ (8306.T) contributed $100 million, the sources said.
The remaining $550 million was provided by seven banks -- Bank of Baroda (BOB.BO), ING (ING.AS), Industrial and Commercial Bank of China (601398.SS), Intesa Sanpaolo (ISP.MI), National Bank of Abu Dhabi NBAD.AD, SEB (SEBa.ST) and Union National Bank UNB.AD, the sources said.
Dubai's stock and credit markets reacted positively to the news that Borse Dubai had successfully refinanced its loan.
Shares on the Dubai bourse .DFMGI closed the day up 5.38 percent, and the cost of insuring Dubai's debt in the credit default swaps market was quoted in the morning as falling 50 basis points (bps) to 950 bps. [ID:nLJ382682]
Mohammed Al Shaibani, executive director and chief executive officer of ICD, Nicholas Hegarty, its chief financial officer, and Essa Kazim, Borse Dubai's chairman, were not immediately available for comment.
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