U.A.E. Borrowers Cut Loan Costs as Economy AcceleratesStefania Bianchi, Samuel Potter and Arif Sharif
United Arab Emirates’ companies, including real estate developer Tourism Development & Investment Co. and holding group Al Ghurair, are seeking to cut borrowing costs as the country’s economy recovers and default risk falls.
Al Ghurair plans to borrow about 1.3 billion dirhams ($354 million) to refinance a 2009 loan, two people with knowledge of the matter said today, asking not to be identified because the information is private. TDIC, as the Abu Dhabi company is known, is seeking a $1 billion loan to replace an existing $600 million facility, according to two other bankers aware of the details.
Companies in Abu Dhabi and Dubai are taking advantage of an accelerating economy and decline in credit risk to press banks for better lending rates. Jebel Ali Free Zone FZE, a business park operator, negotiated a 1.25 percentage point cut on a $1.2 billion Islamic loan last month, while airport retailer Dubai Duty Free in July reduced interest on a $1.75 billion loan.
“If investors around the world have a far more positive view of the U.A.E. now than they had two or three years ago, why not capitalize on that and bring down your cost of funding by renegotiating loan terms?” Chavan Bhogaita, head of the markets strategy group at National Bank of Abu Dhabi PJSC., said by e-mail. “The cash saving for the borrower can be substantial.”
The U.A.E.’s gross domestic product increased 4.4 percent in 2012, the most since it surged 9.8 percent in 2006, according to preliminary government data. Expansion may reach 4.5 percent this year, Economy Minister Sultan Al Mansoori said last month.
A spokesman for Al Ghurair declined to comment. TDIC also declined to comment.
Property markets in the emirates are gaining, with prices for high-end villas in Dubai climbing about 30 percent and those in Abu Dhabi 13 percent this year, according to Cluttons LLC data compiled by Bloomberg. Dubai and Abu Dhabi’s stock markets are among the world’s top 10 fastest-growing indexes this year.
Dubai five-year credit default swaps, contracts insuring the emirate’s debt against default, declined 80 basis points over the past year to 200 at 3:40 p.m. in Dubai today, according to data provider CMA.
Aldar Properties PJSC, Abu Dhabi’s biggest developer, is talking to banks to raise as much as $1.5 billion from a loan to repay a bond due in May, according to two people familiar with the plan. Banks have been asked to submit pricing for the facility, which will be used to repay a $1.25 billion bond, the people said today, asking not to be identified as the information is private.