DUBAI, March 14 (Reuters) - The investment arm of Dubai’s International Financial Centre is in talks with banks to raise a loan worth as much as $1 billion to help it meet the June maturity of a $1.25 billion Islamic bond, three sources said on Wednesday.
DIFC Investments’ (DIFCI) sukuk obligation has been highlighted by analysts as one of the most challenging refinancings in the Gulf Arab region this year, given the size of the maturity and the firm’s limited cash position.
Talks to secure finance are still at an early stage, according to the sources, who said the final loan amount is expected to be between $900 million and $1 billion.
Local banks are expected to provide most of the funding, while international names with an existing relationship with the borrower could also be involved in the final bank group, one of the sources said, speaking on condition of anonymity.
“It’s something tailored more to the local market as the company has got a good asset base and a lot of land around it which the local banks can get on board with,” a London-based banker said.
No immediate comment was available from DIFC Investments.
DIFCI hired U.S. investment bank Moelis & Co to advise it on options for the sukuk maturity, sources told Reuters last month.
DIFCI, whose assets range from aerospace to retail, had $119 million of cash on its balance sheet at the end of 2011, according to a rating announcement from Standard & Poor’s published at the beginning of February.
The agency added that DIFCI would need to raise at least $900 million to meet the liability, although the potential for financial support from the government of Dubai if it was unable to do so was “very high.”
The five-year sukuk, which matures on June 13, was initially sold by CIMB, Deutsche Bank, Dubai Islamic Bank, Emirates NBD, Goldman Sachs and Mashreq.
At 1130 GMT, the DIFC sukuk was trading at 96.600 on the bid side. The instrument has recovered from levels of 87-88 seen in October last year.
DIFC Investments repaid a $200 million revolving credit facility to Deutsche Bank in December, a statement from the company said at the time. (Editing by Sitaraman Shankar)