The Dubai government has hired ABN Amro and Calyon to arrange its first syndicated loan, an $800 million facility to finance general operations, two banking sources said yesterday.
The borrower for the 12-month facility is Dubai’s Department of Finance, acting for the Gulf Arab government, the sources said, declining to be identified.
Dubai last month hired Moody’s Investors Service, Standard & Poor’s and Fitch to arrange a credit rating as it considers ways of financing billions of dollars of projects, including construction of the emirate’s first urban railway system, Sami al-Qamzi, head of the finance department, told Reuters in Dubai.
“We are preparing ourselves for if we plan to borrow,” Qamzi said on earlier Tuesday, declining to give details about requirements. “All options are open,” he said, including selling bonds.
Qamzi could not immediately be reached later to confirm the $800 million loan deal, and Department of Finance officials declined to comment.
The loan deal will be refinanced through an asset securitisation, most likely in 3 to 5 months, the banking sources said.
Syndication was launched on Monday and banks committing to the deal will receive all-in pricing of 30 bps, including fees, depending on when the loan is refinanced.
The margin of the loan has step-up pricing linked to the time the loan is outstanding, the sources said.
The proceeds are for general funding purposes and will allow the borrower to shift from bank financing to capital markets funding, the sources said.
Dubai hired JP Morgan and Swiss bank UBS to advise on a financial strategy, Qamzi said.
Anticipation of a debut bond from Dubai, commercial hub of the world’s biggest oil exporting region, has been growing since a unit of a company owned by the emirate’s ruler raised $2.5 billion in a bond sale last month.
The United Arab Emirates has never sold a sovereign bond.
Dubai Holding Commercial Group’s $2.5 billion of sale bonds in dollars, euros, and pounds was seen as a precursor to the emirate’s debut in the bond market which would create a benchmark for Dubai-based corporate issuers.
Dubai’s government planned to issue $4 billion worth of dollar-denominated bonds in the international market to fund infrastructure projects, a Dubai official said last year.
Dubai Holding Commercial Group’s sale, rated A+ by Standard & Poor’s, AA- by Fitch and A1 by Moody’s, received orders of about $12.5 billion last month.
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