DIFC Investments (DIFCI) has secured a loan of more than US$1 billion (Dh3.67bn) from a syndicate of banks to help pay off an Islamic bond that matures next week.
The investment unit of Dubai's financial free zone agreed the deal with a group of mainly local banks backed by the group's property portfolio.
The $1.25bn sukuk that matures on June 13 is one of a handful of key financial obligations of Dubai government-related entities (GREs) that are being closely watched by the investment community to gauge their ongoing ability to service their debts.
“We believe this transaction sets a new benchmark in terms of size and price for Dubai GREs,” said Shahli Akram, the managing director of DIFCI.
Standard Chartered is the only international bank among the lead arrangers, which include Emirates NBD, Dubai Islamic Bank and Noor Islamic Bank.
Local companies with debt to refinance are increasingly relying on local lenders as many international banks pull in their horns amid an escalating sovereign debt crisis in Europe.
While international banks are expected to continue lending to blue chips in the region, they are unlikely to increase their exposure to lower-quality risk, according to Ghassan Chehayeb, the director of regional credit research at Exotix.
“Many international lenders have been retrenching and they have had to restructure a lot of bad loans in Dubai,” he said.
“There’s a lack of appetite for low-quality Gulf debt.”
The Dubai International Financial Centre (DIFC) is the emirate’s leading hub for banks and law firms. The number of active registered companies gained about 7 per cent last year to 848 according to its own data. About 1 million square feet of office space was added to the development over the same period.
Although as much as half the office space in the emirate lies empty, DIFC enjoys occupancy levels of about 95 per cent, improving its value as collateral.
The $1.25bn DIFC bond that comes due next week was one of three key debt obligations facing Dubai GREs this year. Dubai Holding Commercial Operations Group also repaid a $500 million bond in January.
The next big test will come in November when Jebel Ali Free Zone (JAFZ), an industrial and logistics hub owned by Dubai World, must repay a Dh7.5bn bond.
JAFZ is part of Economic Zones World which also owns Gazeley, a UK warehouse operator that was acquired from Wal-Mart in 2008.
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