Dubai's sovereign wealth fund ICD has launched a $2.8 billion, five-year loan refinancing which is the largest loan to emerge from Dubai since its financial crisis, banking sources said.   

Citigroup, Emirates Bank and HSBC Bank have been appointed to co-ordinate a conventional tranche and Dubai Islamic Bank and Standard Chartered are leading an Islamic tranche.   

ICD could not immediately be reached for comment.   

ICD faces a significant hike on its borrowing costs of 125-150 basis points (bp) on an existing $6 billion loan due to Dubai's debt troubles and political instability in the Middle East.

The new loan will be priced at 350 b.p. and lenders will also receive a 100 b.p. participation fee and a 100 b.p.
structuring fee.   

The fees bring the all-in return on the loan to around 390 bp over five years -- close to Dubai's current credit default swap rate, a senior banker close to the deal said.

Banks are being asked to commit $233 million each for a mandated lead arranger title and have been asked to respond by May 25, with a view to closing the deal by June 8, he added.

'There seems to be a fair momentum to approach banks and get this formalised by the end of the month,' the senior banker said.

ICD asked 10-12 banks to submit proposals for a $4 billion loan in March. ICD repaid $1.2 billion of the original $4 billion total using some of the $3.5 billion cash on its balance sheet, the senior banker said.  

The $6 billion loan that is being refinanced was taken out in August 2008 and was split between a $3.75 billion conventional financing and a $2.25 billion Islamic financing.

That loan was completed on a club basis in September 2008 with a small group of 10-12 banks after liquidity drained from the market after the collapse of Lehman Brothers.   

ICD unexpectedly drew down the $6 billion loan in September 2008 to give it emergency liquidity. The loan had originally been earmarked as an acquisition warchest.   

The funds were placed on deposit with Emirates Bank, a senior banker said, and up to $2.3 billion of the loan was used to help Borse Dubai refinance a loan in February 2009.
  - Reuters