Abu Dhabi-owned Mubadala Development Company has started talks with banks about a deal to refinance a $2bn loan that matures in April.
Mubadala will arrange the new loan itself and is keen to keep pricing as low as possible.
The original loan, signed as a three-year deal in 2007, has a margin of just 17.5 basis points above the London interbank offered rate (Libor).
However, bankers say the new loan is likely to cost substantially more than that. In May 2009, Mubadala completed a $1.75bn bond deal which included a $1.25bn five-year bond which was priced at 395 basis points above US treasuries.
One Dubai-based banker says Mubadala began informal talks with lenders in early January. “It is a large deal to refinance so Mubadala has started talking to banks well in advance of the maturity date,” he says.
Mubadala is the first major Gulf borrower to come to the market seeking fresh finance since government-owned Dubai World announced it was seeking a standstill on the repayments of debts totalling about $22bn.
Mubadala is wholly owned by the government of Abu Dhabi, which is in a far stronger financial position compared to Dubai, due to its massive oil reserves. However, bankers in the country say the pricing of any new loan to Mubadala could still be inflated by the concerns over debt problems in Dubai.
The investment company’s current deal is structured as a revolving credit facility. Such facilities are normally used to fund ongoing operations and enable a borrower to repeatedly use the funds available, repay them and then borrow the money again up to the credit limit.