- Al nowais: we refinanced our project finance-based loans with a corporate debt structure, realizing considerable savings
- Offers received reflected a four times oversubscription on very favourable terms
Deal funded by a global consortium of 19 banks
Abu Dhabi based Emirates Steel, a Senaat company, yesterday announced that it has secured new credit facilities worth US$ 1.3 billion (almost 5 billion UAE dirhams) with 19 local and international banks without Government guarantees. The transaction reflects Emirates Steel’s coming of age and echoes the trust local and international banks have for the quality steelmaker.
Commenting on the deal, the Chairman of Emirates Steel and Senaat, HE Hussain J Al Nowais, said “the facilities will be used to refinance US$ 1.1 billion (nearly 4 billion dirhams) worth of existing financing that was put in place in 2010 through nine banking institutions to finance our expansion projects”. He added that nearly US$263 million (almost 1 billion dirhams) is being invested in acquiring quality steel assets by Emirates Steel.
Al Nowais billed the transaction as a real success: “As an established corporate the company has been able to significantly reduce its borrowing costs and drive the pricing down. We have also extended the loan tenor to eight years, which allows us more flexibility in managing our financial resources. This reflects Emirates Steel’s coming of age and echoes the trust local and international banking institutions have in us”.
He welcomed the level of interest that multi-national financial institutions have shown in the deal and called it: “a true endorsement by the international financial markets of what we have achieved at Emirates Steel.” He further added that the transaction was concluded with no Government guarantees and with more favourable terms than the 2010 facilities.
The deal, which was brokered by France’s BNP Paribas, was four times oversubscribed.
Al Nowais pointed out that Emirates Steel is pushing ahead with its strategic ambitions to realize its expansion goals of producing integrated steel solutions utilizing its highly skilled UAE national employees and producing steel to international standards. The objective, he said, is to supply the global markets with “UAE Made” quality steel products. He added that the 2010 financing was put in place to finance the Phase 1 and Phase 2 expansion projects, which pushed up plant capacities in 2012 to 3.5 million tons per year. These projects are now complete and generating solid cash flows.
Al Nowais, who chairs one of the most powerful industrial holding corporations in the UAE, explained: “The deal will allow us to consolidate Senaat’s steelmaking assets under Emirates Steel, which was set up in 1998 at a cost of US$ 3 billion (nearly 11 billion dirhams) to provide integrated solutions in steelmaking and to support local downstream industries in line with Economic Vision 2030.
Emirates Steel’s CEO HE Saeed G Al Romaithi said the financing will also support further expansion of Emirates Steel’s product range: “We are now working on bringing to market several technically-challenging new products to meet the growing demands of our customers and to expand our customer base”. Plans by Emirates Steel are now underway to add value-added products to the range to reduce its exposure in the highly-competitive commodities markets.
“The new range of value-added products includes branded nuclear quality steel, medium and high carbon wire rod and offshore grade heavy sections and sheet piles,” he said. In total, the Company boasts three bar mills, a wire rod mill and a structural steel mill with a combined capacity of 3.5 million tons a year.
Giving details about the eight-year facility, Emirates Steel’s CFO Stephen J Pope explained that it consists of a $242.5 million (approximately 900 million dirham) Islamic term facility with UAE-based Abu Dhabi Islamic Bank (ADIB), Al Hilal Bank and Dubai Islamic Bank (DIB) together with a $1,057.5 million (nearly 3.9 billion dirham) conventional term facility funded by Abu Dhabi Commercial Bank (ADCB), Al Khaliji, Arab Bank, Arab Banking Corporation (ABC), Bank of Tokyo Mitsubishi, BNP Paribas, Citi, Credit Agricole CIB, First Gulf Bank (FGB), National Bank of Abu Dhabi (NBAD), Natixis, Royal Bank of Scotland (RBS), Societe Generale, Unicredit and Union National Bank (UNB). Dentons acted as legal counsel to Emirates Steel and White & Case LLP acted as legal counsel to the lenders.
Pope pointed out that the facility attracted strong interest from the international financial markets. “The offers received reflected a four times oversubscription on very favourable terms. The fast track development of Emirates Steel meant that we have been able to refinance our project finance-based loans with a corporate debt structure; realizing considerable savings to the company together with an extended tenor to reduce liquidity risk.
“Further, the timing of the deal has realized real benefits; there is excess liquidity in the market and we established a competitive bidding process to minimize our costs, a strategy which will realize considerable cost savings for the company”.