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Thu 1 Dec 2011 04:30 PM

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Dubai’s Emaar Properties said to raise $800m loan

The financing is backed by Emaar’s flagship Dubai Mall, say banking sources

Dubai’s Emaar Properties said to raise $800m loan
Emaar is said to have used Dubai Mall as backing for the finance

Emaar Properties, the United Arab
Emirates’ biggest developer by market value, agreed on an $800m Islamic loan
with three banks that pays 3.5 percent more than the benchmark rate, two
bankers familiar with the transaction said.

The developer of the world’s
tallest tower
will also pay fees for the facility, which is provided by Dubai
Islamic Bank, Standard Chartered and National Bank of Abu Dhabi, the bankers
said, declining to be identified because the information is private.

The deal is expected to be signed
on Dec 4 and includes a five-year bullet loan as well as an 8-year amortizing
facility, the bankers said.

The financing is backed by Emaar’s
flagship Dubai Mall, they said.

The so-called profit rate of about
4 percent - the three- month London interbank offered rate was at 0.53 percent
today - compares with a yield of 8.55 percent on Nov 30 on Emaar’s Islamic bond
maturing August 2016, according to data compiled by Bloomberg.

Islamic loans pay a profit rate to
comply with the religion’s ban on interest payments.

Emaar continuously explores
various options for raising funds for its long-term development plans.
including refinancing of debt, the company said in an emailed response to
questions from Bloomberg News. Details will be disclosed at the appropriate
time, it said.

A spokesman for National Bank of
Abu Dhabi said the bank would not comment on client matters, while a spokesmen
for Standard Chartered declined to comment. Nobody was available from Dubai
Islamic Bank to comment today, a public holiday in the UAE.

Dubai’s property market went from
being one of the world’s
best performing to the worst following the global
credit crisis three years ago, with home prices slumping 64 percent since the
mid-2008 peak, according to Deutsche Bank estimates.

Emaar has been hurt by the
downturn but avoided debt restructuring, unlike Nakheel, the builder of man-made
islands off Dubai’s coast.

Emaar reported Oct 27 a 34 percent
decline in third- quarter profit as revenue dropped and property deliveries
slowed. The company plans to borrow $700m and build a commercial center in its
Eighth Gate development in Damascus, chairman Mohamed Alabbar told Dubai TV on
Oct 24.

Emaar in January sold $500m of
Islamic bonds due August 2016. In September 2010, the developer issued $500m of
five-year convertible notes to pay contractors and convert some of its $1.4bn of
short-term loans into longer-term debt.

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