Middle East syndicated lending falls behind

08 October 2014

UAE-based telecoms firm Etisalat raises largest loan in region

Syndicated lending volumes in the Middle East and North Africa (Mena) region are falling behind compared with last year, according to third-quarter figures released by UK-based data provider Dealogic.

A total of $10.6bn-worth of syndicated loans were raised in the Mena region in the third quarter of this year, which is almost 20 per cent lower than the $13.2bn raised in the same period in 2013.

During the first nine months of the year, $43.9bn-worth of syndicated loans were raised, a total that lags behind the $51bn-worth of deals closed in the same period last year.

Several reasons have been cited for the slowdown, including borrowers potentially considering or using other financial instruments such as bonds and sukuk (Islamic bonds).

Some companies, particularly government-related entities (GREs), have also focused more on refinancing existing debt on better terms rather than looking to raise new money this year.

Yet, the decline in syndicated loans is not necessarily a sign of reduced bank lending in the region or a lack of credit appetite among borrowers.  

The regional bank market is very liquid and some analysts suggest that companies might prefer to secure large bilateral facilities at good rates from their relationship banks, rather than raise debt via a syndicate of different financial institutions.

Forecasts for long-term credit growth in the region are generally healthy, particularly in the Gulf region.

A report from the US’ Standard & Poor’s, published in September, says domestic credit in the GCC is due to grow by 10 per cent in 2014 and 2015.

One company that chose to tap the syndicated loan market was UAE telecoms company Etisalat. It raised a $4.4bn loan, the largest syndicated loan raised in the region to date, to fund its acquisition of a 53 per cent stake in Morocco’s Maroc Telecom from French firm Vivendi.

The second-largest loan was for DP World, the Dubai-based port operator, which raised a $3bn facility to replace an existing $1bn deal that was maturing in 2018. This loan is an example of a company tapping the debt markets to refinance debt with better terms and conditions.

UAE-based companies have demonstrated the strongest appetite for growth, with five of the top ten regional borrowers based in the country. Other top borrowers were based in Saudi Arabia, Oman and Qatar.

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