Dubai’s Du Lowers Debt Cost With $1.17 Billion Refinancing Deal

Du, the telecommunications provider majority-held by United Arab Emirates state-linked companies, said it secured $1.17 billion of loan facilities to lower its cost of borrowing by as much as $9 million over five years.

The Dubai-based operator obtained a $720 million club deal from Abu Dhabi Commercial Bank PJSC, National Bank of Abu Dhabi PJSC and Saudi Arabia’s Samba Financial Group to replace a $220 million three-year loan due in June and a $500 million five-year facility due 2017, it said today in a statement to the Dubai Financial Market. Du pays a margin of 120bps over Libor and all-in-cost of 140 bps, saving the company $7 million over five years.

Companies in Abu Dhabi and Dubai are taking advantage of an accelerating economy and a decline in credit risk to press banks for better lending rates. Du made a profit of 1.99 billion dirhams ($542 million) after royalty payments last year compared with 1.98 billion dirhams in 2012, beating the mean estimate of nine analysts on Bloomberg.

“The company is in very good shape with free cash flow and operations going well,” Taher Safieddine, a Dubai-based analyst at Shuaa Capital PSC said by phone today. Du has managed to refinance at a lower rates which is a big positive and it will “definitely help profitability”, he said.

Du also said Standard Chartered provided a five-year $300 million facility at a margin of 115bps and all-in-cost of 140bps, which helps refinance a £100 million ($166.5 million) facility. The deal will save Du $1.2 million. DBS Singapore provided a $150 million three-year facility at a margin of 120bps over Libor and all-in-cost of 140bps that includes $100 million refinancing.

Osman Sultan, du’s Chief Executive Officer, said: “We have taken the opportunity of the historical low interest rate environment to refinance some of our existing debt and have been able to negotiate very favorable terms strengthening our balance sheet further.”

Du shares were trading 0.7 percent higher at 5.90 dirhams 12:32 p.m. in Dubai.

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