DUBAI/ABU DHABI: Abu Dhabi’s Emirates Steel is in talks with banks for a $1.3bn loan to help refinance an existing facility and raise cash to purchase assets from its parent firm, three banking and industry sources aware of the matter said yesterday.
As well as securing the assets from parent Abu Dhabi’s General Holding Corp (Senaat), thereby consolidating all steel assets into one entity, the deal will cut the costs of a loan which was signed in 2010 and funded an expansion of Emirates Steel’s operations.
While the original deal still has more than three years to run, the company is hoping to take advantage of a lower interest rate environment, a tactic deployed by other UAE-based firms who have sought to replace expensive financing taken out during the global financial crisis.
Refinancing of a $2.2bn debt package used to fund construction of the Shuweihat 2 water and power plant in Abu Dhabi, which was completed last year, having initially put funding in place in October 2009, is one such example.
Projects can also secure lower funding costs once they are operational as they are generating revenue, thereby making them less of a risk to lenders.
“The company (Emirates Steel) has strong cash flows and it can now switch from the high project-finance interest rate it secured earlier,” said one source aware of the transaction, who declined to be named because the information isn’t public.
The 2010 deal was worth $1.1bn in total, split between a $733m conventional loan and a $367m Shariah-compliant loan, and was funded in UAE dirhams. The new transaction will be denominated in dollars, the sources said.
While the initial debt was provided by local and regional banks, international lenders have been invited to participate in the refinancing.
Reuters
