MAF aims to raise $1.5bn loan

03 September 2013

Mall operator increases loan size on strong demand from banks

Dubai-based conglomerate Majid al-Futtaim (MAF) is approaching banks to raise a loan of up to $1.5bn to refinance existing debts, according to bankers in the UAE.

The company began approaching lenders in late July for a $1bn loan, but the response from banks is understood to be so strong that MAF is expected to close the deal at around $1.5bn.

Proceeds from the loan will be used to refinance a $1bn loan raised in 2011. That deal was split between a three-year revolving credit facility priced at 250 basis points above the London interbank offered rate (Libor), and a five year term loan priced at 275 basis points. The new loan will have a five year tenor and will be priced at around 200 basis points.

“There has been quite a bit of appetite for this loan and MAF may increase the size to $1.5bn and use the additional funds to refinance other loans that are at a higher interest rate,” says one Dubai-based banker.

MAF is arranging the new loan itself. It has asked companies to provide commitments in dollars or dirhams, but is understood to have told potential lenders that it has a preference for dollars.

One source close to the company says, “The revolving credit facility does not mature until June 2014 and the term loan matures in 2016 so they have a lot of time before they need to be refinancing but they want to lock in cheaper financing while the banks have so much liquidity.”

By the end of May the loan-to-deposit ratio for UAE banks had fallen to 91 per cent, compared to over 100 per cent at the end of 2011. As a result of the boost in liquidity levels since then, lending margins have dropped substantially. Coupled with rising confidence in the economic recovery in Dubai, this has sparked a wave of refinancing or loan repricing, as borrowers look to reduce their funding costs.

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