Syndicated lending to companies and projects in the Middle East dropped to a five-year low of $26 billion for the first nine months of 2009, according to Thomson Reuters LPC. The data shows a 73 percent fall compared with $94.5 billion of loans completed in the first nine months of 2008. Project financing made up 31 percent, or $8 billion, of this total as banks have been willing to lend schemes backed by strong sponsors and well structured deals. At $18 billion, Middle Eastern firms have not taken out so few corporate loans since 2004. The loan market has been hit by the debt restructurings of privately owned groups Saad and Algosaibi and fears over Dubai's refinancing program. Nearly half of all the region's borrowing in the year to date - $12 billion - is new money, although this figure is skewed by nearly $6 billion of loans agreed to for Abu Dhabi's IPIC in July. Dubai's ability to refinance its debt is still giving banks cause for concern. Dubai World is restructuring $12 billion of syndicated and bilateral loans, banking sources said. That includes loans for Istithmar, the investment arm of the Dubai government, as well as Nakheel which also has a $3.5 billion Islamic bond maturing in December. The region's loan market will struggle to move forward until government support and the borrowers' plans become clearer, bankers said. More uncertainty hit the Gulf in September when Bahrain-based Gulf Finance House shelved plans to refinance a $300 million Murabaha deal after mandating Deutsche Bank to lead the deal in July. International lenders faced another setback in September when Qatar's Diar Real Investment appointed Qatar Islamic Bank to arrange a 3.5 billion riyal Islamic ($933.3 million) loan. This snubbed three international banks that were close to the arranging mandate for the refinancing and scuppered chances of an increasingly rare Gulf syndicated loan. There have been some successes. Telecoms companies Qtel and Zain Saudi Arabia signed a $2 billion forward start loan and a $2.5 billion Islamic loan, respectively. Major success stories were reserved for project finance deals, with the conclusion of deals for Dolphin Energy and Shuweihat 2 power generation and water desalination project in Abu Dhabi.
