UAE companies are seeking to cut borrowing costs… default risk falls.

UAE companies are seeking to cut borrowing costs as the country’s economy recovers and default risk falls. Report: Bloomberg

UAE companies, including real estate developer Tourism Development & Investment Co and holding group Al Ghurair, are seeking to cut borrowing costs as the country’s economy recovers and default risk falls.
Al Ghurair plans to borrow about 1.3bn dirhams ($354mn) to refinance a 2009 loan, two people with knowledge of the matter said, asking not to be identified because the information is private. TDIC, as the Abu Dhabi company is known, is seeking a $1bn loan to replace an existing $600mn facility, according to two other bankers aware of the details.
Companies in Abu Dhabi and Dubai are taking advantage of an accelerating economy and decline in credit risk to press banks for better lending rates. Jebel Ali Free Zone FZE, a business park operator, negotiated a 1.25 percentage point cut on a $1.2bn Islamic loan last month, while airport retailer Dubai Duty Free in July reduced interest on a $1.75bn loan.
“If investors around the world have a far more positive view of the UAE now than they had two or three years ago, why not capitalise on that and bring down your cost of funding by renegotiating loan terms?” Chavan Bhogaita, head of the markets strategy group at National Bank of Abu Dhabi PJSC, said by e- mail. “The cash saving for the borrower can be substantial.”
The UAE’s gross domestic product increased 4.4% in 2012, the most since it surged 9.8% in 2006, according to preliminary government data. Expansion may reach 4.5% this year, Economy Minister Sultan al-Mansoori said last month.
A spokesman for Al Ghurair declined to comment. TDIC also declined to comment.
Property markets in the emirates are gaining, with prices for high-end villas in Dubai climbing about 30% and those in Abu Dhabi 66% this year, according to Cluttons data compiled by Bloomberg. Dubai and Abu Dhabi’s stock markets are among the world’s top 10 fastest-growing indexes this year.
Aldar Properties, Abu Dhabi’s biggest developer, is talking to banks to raise as much as $1.5bn from a loan to repay a bond due in May, according to two people familiar with the plan. Banks have been asked to submit pricing for the facility, which will be used to repay a $1.25bn bond, the people said last week, asking not to be identified as the information is private.

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