Investment Corporation raises $5.6bn loan

Government-owned Investment Corporation of Dubai (ICD) has raised $5.6 billion (Dh20.5bn) through conventional and Islamic financing facilities, their legal advisors said yesterday.

Allen and Overy had advised 13 mandated lead arrangers to raise a $3.6bn conventional facility, a $1.5bn murabaha facility and a $500 million co-ownership facility, it said in an e-mailed statement. Reuters reported on July 30 that ICD is in talks with lenders for a $6bn syndicated loan.

ICD Chief Executive Officer Mohammed Al Shaibani said earlier that ICD manages its own portfolio of assets in line with global standards and is focussed on both local and international opportunities.

The total borrowings by Dubai Government-owned entities – known in the loan market as Dubai Inc – will bring state-backed borrowing to $32.5bn this year, as the emirate has completed $16bn of loans in 2008, according to Reuters Loan Pricing Corp (RLPC) data.

Sovereign-backed Dubai World unit Port and Free Zone World, Dubai Financial, Dubai Holding, Dubai Drydocks, Dubai Aerospace Enterprise, Palm District Cooling and DIFC Investments are syndicating $9.1bn of loans in the market.

In addition, Nakheel Group, developer of the palm-shaped islands off Dubai's coast, is raising a $1.3bn loan, a banking source told Reuters in July. The $32.5bn of loans planned for the year so far dwarfs Dubai's Government-linked borrowing of $9.3bn for the whole of 2007, according to RLPC data.

The loans are relying on European and Asian bank liquidity as regional Gulf lenders are struggling with increased funding costs and limited access to dollar funds stemming from uncertainty over the dollar peg to local currencies.

Loans are now being structured to incorporate tranches in regional currencies, particularly in UAE dirhams, but regional bank participation has been limited even on this basis and loans continue to rely on foreign bank participation. European and Asian banks are keen to be involved in Dubai Inc's loans, which offer a good yield compared to Western European counterparts.

ICD owns stakes in a large number of companies – including Emaar and Dubai Financial Market – in various sectors.

The numbers

$9.3bn: Was raised by Dubai Inc for the whole of 2007

$32.5bn: Will be borrowed by government-owned entities – known as Dubai Inc – this year