ICD had been expected to repay part of the loan and had already agreed with banks to refinance $2.8 billion in what would have been the largest loan to emerge from Dubai since its 2009 debt crisis.
The refinancing was agreed at an all-in price of about 400 basis points over Libor. Several bankers said all the documentation had been completed and was awaiting a sign-off from the government.
“Today’s announcement demonstrates that as part of the government of Dubai, ICD is committed and able to meet its debt obligations,” Mohammed Al-Shaibani, executive director and chief executive of ICD, said in a statement.
ICD holds about $70 billion in assets and its portfolio includes airline Emirates and stakes in Dubai’s largest bank, Emirates NBD, developer Emaar Properties and Borse Dubai.
“From a headline perspective, the announcement is encouraging. However, it is not clear where the cash is going to come from,” said John Bates, head of fixed income at asset manager Silk Invest.
“They have talked about using dividends from portfolio companies for repayments but there isn’t much information on the structure of the repayment.”
Airline Emirates, which issued a heavily oversubscribed $1 billion bond in June, contributed about AED2 billion ($544.6 million) in dividends to the government last year.
Dubai is working to rebuild its credibility amongst investors who fled after state-owned conglomerate Dubai World announced in 2009 that it would restructure about $25 billion in debt.
The crisis left the tiny desert city state with grand ambitions coping with a burst property bubble and a debt pile estimated at over $100 million at its state-owned companies.
Dubai’s debt insurance costs have narrowed since Dubai World reached a deal with creditors last year, however, hitting pre-crisis levels in June. It launched a $500 million bond this year, its second since the debt crisis, in a sign appetite for Dubai debt and confidence is returning.
The emirate is seen as a safe haven amid the political instability engulfing the wider region.
“Given the level of concern that has prevailed regarding Dubai Inc’s ability to repay or refinance obligations in 2011 and 2012, today’s news is very significant indeed,” said Chavan Bhogaita, head of markets strategy at National Bank of Abu Dhabi.
About $30 billion in refinancing is due by 2012.
The $4 billion loan to be repaid is the three-year tranche of a total $6 billion deal signed in 2008. The remaining $2 billion, five-year tranche matures on 21 August 2013.
