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Fri 14 Aug 2015 09:16 AM

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UAE's Mubadala said to seek better terms for $1bn loan

Sources say Abu Dhabi investment fund is aiming to refinance loan to build campus at Zayed University

UAE's Mubadala said to seek better terms for $1bn loan

Abu Dhabi state investment fund Mubadala is seeking to refinance a $1 billion loan that helped back the construction of a campus at the emirate's Zayed University, three sources familiar with the matter said on Thursday.

The refinancing will result in a much reduced interest rate for the facility which was originally signed at the end of 2009 and was used to build a campus catering for 6,000 students.

It is the latest refinancing in the United Arab Emirates (UAE) in which borrowers have sought improved terms to existing debt, aiming to take advantage of ample liquidity in the local banking sector.

Mubadala declined to comment. The sources spoke on condition of anonymity as the information isn't public.

Pricing on the deal has been set at around 130 basis points (bps) over benchmark interest rates, two of the sources said. This is significantly lower than the existing ten-year loan, which started at 290 bps and increased in stages to 390 bps by the time the loan matured.

The third source noted the loan was signed in 2009 when cash was expensive in the wake of the global financial crisis, so Mubadala had been looking at different ways to bring down the cost. It had considered a bond issue but decided bank finance was the easiest and cheapest option, the source added.

National Bank of Abu Dhabi and Abu Dhabi Commercial Bank are leading the refinancing, according to the first two sources.

Other UAE companies to have signed loan refinancings with improved terms in recent months include Abu Dhabi National Energy Co (TAQA), Topaz Energy and Marine and Emaar Properties.

However, the fall in the oil price in the last 12 months is starting to reduce liquidity in the local banking system, meaning such refinancings are likely to become harder in the future.

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