Middle Eastern companies signed $6.65 billion (Dh24.40bn) of syndicated loans in the first quarter, up 30 per cent from $5.13bn in the same quarter a year before, according to Thomson Reuters data.
Abu Dhabi state-owned Ipic's $3.6bn, three-year loan was the first UAE loan to be launched after Dubai World's standstill request in November and the biggest corporate Gulf loan since its $5bn loan of 2009. The deal proved extremely popular and marked the reopening of the Gulf loan market, raising nearly $5bn and increased from $2.5bn as a result. Ipic and Emirates Aluminium originally planned to raise funds in the bond market but abandoned their plans in favour of loans in the first quarter.
Fierce competition among banks for relatively scarce mandates helped to drive down pricing in the Gulf.
Falling pricing for loans in Europe have put pressure on Middle Eastern margins to drop, although Gulf-based companies continue to pay a premium over their Western counterparts.
Ipic was able to slash its cost of borrowing to 150 basis points (bps) over LIBOR, compared with 250-400 bps on a one-year tranche from 2009 it refinanced. Mubadala is close to agreeing a 75 bps margin having called on its relationship banks for a $2.5bn, three-year club loan, bankers said.
The revolving credit includes usage fees that will boost pricing by 20 bps if more than 33.3 per cent of the loan is drawn and 40 bps for more than 66.6 per cent – but the deal is priced closer to European loans than any recent Gulf deals. Mudabala's pricing matched the 75 bps margin agreed on Q1 deals for A- rated European corporate borrowers such Austrian OMV, German Henkel and Dutch Philips, but as a AA higher-rated company Mubadala continues to pay a slight premium.
Qatar Telecom is looking to capitalise on market conditions and downward pressure on pricing to reduce borrowing costs and has approached banks to refinance a $2bn forward start loan that signed last year.