Yesterday, Borse Dubai, the government-owned exchange group, announced that it had signed a $2.5 billion term loan facility to refinance its $3.8 billion term loan facility used to fund investments in NASDAQ OMX Group and the London Stock Exchange. The state-owned Investment Corporation of Dubai, as Borse Dubai’s main shareholder, reportedly provided approximately $1.3 billion to Borse Dubai via state-owned Dubai banks, while a synidate of international banks provided the remaining $1.2 billion. This multicurrency syndicated facility matures in one year, with a one-year extension option at Borse Dubai’s election, paying 325 basis points over LIBOR. Last year, Borse Dubai took out the $3.8 billion loan to finance its acquisition of the OMX Group, under which Borse Dubai took a stake in NASDAQ in exchange for NASDAQ’s stake in Dubai’s international financial exchange, now known as NASDAQ Dubai.
The refinancing arises at a time when widespread concerns had been raised regarding Borse Dubai’s ability to repay the $3.8 billion loan, as Dubai’s economy has been battered by mounding job losses, a bursting property bubble and $80 billion in accumulated short-term debt. Furthermore, earlier this month, International Monetary Fund (IMF) Middle East and Central Asia Department Director Massood Ahmed projected that Gulf Cooperation Council states, which includes the United Arab Emirates (UAE), would see GDP growth rates fall from 6.8% in 2008 to 3.5% in 2009.
Finally, the Dubai Financial Services Authority (DFSA), the sole independent regulator of all financial and ancillary services conducted through the Dubai International Financial Center, announced that it had entered into a Memorandum of Understanding yesterday with its Swedish counterpart, the Finansinspektionen (FI), regarding cooperation and exchange of regulatory information. The chief executive of the DFSA stated that the signing of the MOU with the FI was “initiated by the joint venture between the Nordic exchange OMX with NASDAQ and Borse Dubai, which reflects the increasingly global nature of securities and other financial business thus strengthening the importance of links between regulatory authorities.” The DFSA now has a bilateral and multilateral MoU network with 70 regulators across the globe.
The moves in Dubai follow closely on the heels of actions taken in the UAE’s oil-rich emirate Abu Dhabi earlier this month, with Abu Dhabi injecting AED 16 billion (approximately $4.4 billion) into its five largest banks. However, Abu Dhabi’s actions were unilateral in nature, in that only Abu Dhabi banks received recapitalization assistance. Media reports indicate that as a result of these actions, fears have arisen that Abu Dhabi is reluctant to support Dubai entities facing failure.