Middle Eastern firms agreed syndicated loans worth $54 billion in the first half of 2008, up from $44 billion in the same period of 2007, despite the global credit crunch, according to Reuters Loan Pricing Corp. There was a raft of large loans, including a $5.5 billion deal for state-owned investment group Dubai World and $3 billion loans for Borse Dubai and Abu Dhabi utility TAQA. Multi-billion project loans were agreed, including $13 billion worth of financing for state-owned Saudi mining firm Maaden's phosphate mining venture, SABIC's Saudi Kayan petrochemicals scheme and Emirates Aluminium, which helped push up volume. Middle Eastern companies secured $35 billion in corporate loans in the first half of 2008, 25 percent up from $28 billion year-on-year. Islamic loans totaled $9 billion in the first half, matching the 2007 volume. While the region's borrowing volume figures are healthy, driven by state-backed firms on the trail for acquisitions, the global credit crisis means borrowing costs have increased in the Middle East. Bankers in the region say they are facing challenges to price deals as market expectations have gone up considerably. State-backed Dubai World's $5.5 billion loan paid margins ranging from 135-185 basis points (bps) over Libor, a lot higher than a high caliber Western European borrower would pay, bankers said. For example, Europe's largest entertainment group Vivendi paid a margin of 32.5-40bps for its recent €3.5 billion loan. Dubai World's deal also allowed banks to commit in US dollars or UAE dirham-equivalent, which has become a common strategy for selling loans in the region this year since there is a shortage of dollars among Gulf-based banks, stemming from the credit crisis and uncertainty over local currency pegs. A banking source said around 22 percent of the total $5.5 billion was committed in dirhams. TAQA's $3 billion loan and Dubai-based telecom company du's debut AED3 billion loan, currently in syndication, also allow commitments in either currency.
