Mubadala asks banks for commitments by 8 April

05 April 2010

Abu Dhabi state-owned firm offers bank margin of just 115 basis points on $2.5bn loan

Abu Dhabi government-owned Mubadala Development Company has given banks until 8 April to respond to offers to fund a $2.5bn loan deal.

The loan is a refinancing of an existing facility of the same size. Mubadala began talks with banks about the refinancing in early February, and at the same time sent banks a term sheet for the loan but did not disclose what margin it would pay lenders. In early April, Mubadala broke several weeks of silence by offering banks a margin of just 115 basis points above the London interbank offered rate (Libor) and giving just over a week to respond with commitments.

This puts the deal below the 150 basis points above Libor level that Abu Dhabi-based International Petroleum Investment Company (Ipic) achieved for a $3.6bn loan refinancing in late March. That deal had a tenor of three years and was arranged by the UK’s HSBC, Bank of Tokyo Mitsubishi, Spain’s Santander, and National Bank of Abu Dhabi.

One banker close to the Mubadala loan says, “Mubadala has been arranging this loan itself and it has always been clear that it would be after very aggressive pricing.”

Mubadala’s original loan from 2007 was priced at just 17.5 basis points above the Libor with a group of 21 banks. The new loan is expected to close before the end of April and will have a tenor of three years. It is expected that Mubadala will try to increase the size of the loan if the response from the debt market is strong enough.

The success in getting banks to agree to such low pricing comes despite both Ipic and Mubadala being downgraded from Aa2 to Aa3 by Moody’s Investor Service in early March.

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