HSBC Among Banks Said to Agree $4 Billion Al Jaber Debt Deal

Al Jaber Group, a family-owned industrial group in Abu Dhabi, reached a deal with creditors including HSBC Holdings Plc (HSBA) to restructure about $4 billion of debt, according to two people familiar with the matter.

The company agreed with its five main lenders on terms, including loan repayments over five years, according to the people, who asked not to be identified because the information is private. The debt, which includes both conventional and Islamic facilities, will pay annual interest of between 300 basis points, or 3 percentage points, to 400 basis points over the London Interbank Offered Rate, one of the people said.

National Bank of Abu Dhabi PJSC, Abu Dhabi Commercial Bank PJSC (ADCB), Royal Bank of Scotland Group Plc and Union National Bank PJSC make up the coordinating committee with HSBC negotiating the new terms on behalf of about 30 lenders, one of the bankers said. The deal will result in no loan losses, he said.

Al Jaber, whose interests span construction, engineering and shipping, is one of several United Arab Emirates companies restructuring loans after a crash in property prices sparked by the global credit crisis. Dubai World, one of Dubai’s three main holding companies, reached a deal with creditors in 2011 to delay payments on about $15 billion of bank loans.

A spokesman for Al Jaber Group, who asked not to be identified because of company policy, declined to comment. Spokesmen for HSBC, RBS and Union National Bank also declined to comment. Spokesmen for National Bank of Abu Dhabi and Abu Dhabi Commercial Bank couldn’t immediately be reached.

Total Debt

Al Jaber’s total debt of about 15 billion dirhams ($4 billion) includes about 7.5 billion dirhams of loans and overdrafts, while the rest is so-called unfunded facilities including performance bonds and guarantees, according to the banker. PricewaterhouseCoopers LLP and Allen & Overy LLP advised the bank group on the restructuring while NM Rothschild & Sons Ltd and Norton Rose LLP advised Al Jaber Group.

The new facilities have a quarterly amortizing schedule and require no asset sales by the group, although Al Jaber said it will continuously evaluate options to sell non-core assets, according to one of the people. The proposal has now been presented to the wider lender group for approval, he said.

Al Jaber Group, which has assets of 18 billion dirhams, will sell 60 percent of its defense business, Al Jaber Land Systems, to Abu Dhabi’s Tawazun Holding, The National daily reported Feb. 12 citing people familiar with the matter.

Diversification

The U.A.E., which holds more than 7 percent of the world’s oil reserves, had one of the world’s worst property crashes in the aftermath of the global credit crisis. Abu Dhabi and Dubai, the country’s two biggest emirates, plan to spend billions of dollars in real-estate, transport infrastructure and industry as part of a plan to diversify their economies away from oil.

Dubai Group LLC, an investment company owned by the emirate’s ruler, is another company close to completing a deal with about 35 lenders on restructuring $6 billion of bank debt, two bankers familiar with the matter said in February. That agreement includes an extension of some loan maturities to 12 years and payment of below-market interest rates of between 1 percent and 2.5 percent, according to the bankers.

The debt restructuring deal has led to loan losses at Dubai Group’s lenders. Emirates NBD PJSC (EMIRATES), the U.A.E.’s biggest bank by assets, said Jan. 31 it had set aside 54 percent of the value of its Dubai Group’s loans, or 2.51 billion dirhams ($683 million), to cover for losses as a result of the restructuring.

Dow Jones reported yesterday that the Al Jaber Group had reached an agreement with the coordination committee.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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