Firms turning to Club financing

Corporate lending has started to pick up, but in the form of bilateral and club deals replacing syndicated transactions, which ruled the market in 2007 and the first three quarters of 2008, said bankers.

The many bilateral and club deals successfully concluded in the past few months include names such as Bhukatir Group, ANC Group and Al Yousuf Group. "All these transactions were arranged for general corporate facilities," sources close to the deals told Emirates Business.

An investment banker said that unlike in the past, banks were selective and only well-diversified corporate groups with proven track record and financial stability stand to strike a bargain on pricing.

Syndicated loan transactions dropped since Q4 2008 due to slowdown. "The average size of the current transactions is between Dh50 million and Dh200m and the pricing is upwards of six per cent," said the head of corporate banking with a Dubai-based bank.

A top Mashreqbank official said hardly any bank was involved in serious discussions on syndicated deals. "It may take some time more before meaningful discussions on large deals could commence," he said.

Bankers said financing is strictly on a structured basis whereby repayment is ensured. "Happy days of syndicated corporate deals are over, at least for [now]," said a banker. While syndicated deals originate through one or a few large banks underwriting a big lending commitment and then down-selling the same to other large and medium-sized banks, club deals are done by two to three banks which come together to lend on standard terms.

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