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Sun 16 Feb 2014 06:01 PM

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UAE's du agrees terms of $720m loan financing

The telco's five-year facility will be used to replace two existing debt facilities and lower the company's funding costs, two banking sources said

UAE's du agrees terms of $720m loan financing

UAE telecom firm du has
agreed terms on a $720m loan which will be used to replace two existing
debt facilities and lower the company's funding costs, two banking sources said
on Sunday.

The five-year loan will be provided by Abu Dhabi
Commercial Bank, National Bank of Abu Dhabi and Saudi Arabia's Samba Financial Group,
the sources who both have knowledge of the matter said. They spoke on condition
of anonymity as the information is not public.

Du declined to comment when contacted by Reuters.

The interest rate which du will pay for the new
loan will be 140 basis points over the London interbank offered rate (Libor),
the sources said.

Bankers not involved in the deal remarked that the
pricing which du ultimately got from the three lenders was extremely cheap,
especially as it had managed to negotiate a loan with a five-year lifespan.

"There have been talks for maybe 3-4 months
between the company and banks but while they wanted five years, the most that
banks were prepared to offer was three years - especially at the pricing levels
they wanted," said one of the bankers not involved in the transaction.

By comparison, Commercial Bank of Qatar, the Gulf
Arab state's second-largest lender by assets, is currently marketing a $600m loan, split between a two- and three-year portion, which pays 120 and
140 bps respectively when the margin is combined with the fees a bank will
earn.

Du's new loan will replace two existing debt
facilities.

The first is a $220m three-year loan which
expires in June. That transaction paid a margin of 145 bps over Libor and was
provided by Dubai lenders Emirates NBD and Mashreq as well as NBAD and Samba,
according to Thomson Reuters data.

It will also replace a $500m facility raised
in late-2012, which is due to run until 2017 and pays a margin of 175 bps over
Libor. The banks who funded that deal were ADCB, Mashreq, NBAD and Samba.

Du joins other companies which are currently
raising cash to refinance existing debt, even if those facilities still have a
substantial amount of time to run.

Emirates Steel is seeking $1.3bn from banks
to replace debt and fund the purchase of assets from its parent firm, even
though the original deal has more than three years to run.

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