Narrative
Full Description
Project narrative
Circa October 20, 2007, a syndicate of over 50 banks — including the Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)) — entered into a $5 billion USD syndicated bridge loan agreement with Dubai World Corporation — an investment company wholly owned by the Government of Dubai — for general corporate purposes, such as acquisitions and investments. The loan carried a maturity period of 364 days and a variable interest rate of LIBOR plus an initial margin of 85 basis points (bps) for the first six months, then increasing to 110 bps. ICBC (Asia) was one of the mandated lead arrangers for this loan. In addition to ICBC (Asia), Gulf Bank of Kuwait K.S.C. served as a senior arranger and contributed $250 million USD, while Royal Bank of Scotland (RBS), Credit Suisse International (CSi), and the London Branch of Deutsche Bank AG served as the initial mandated lead arrangers and bookrunners. The loan was increased in syndication from its initial launch of $2.7 billion USD. The 50 lenders represented over 27 countries, with 40% of commitments coming from European banks, 30% from Asian banks, and 21% from the Gulf. The proceeds were to be used for general corporate purposes, such as acquisitions and investments, including support the borrower's plan to buy a stake in American casino operator MGM Mirage based in Paradise, Nevada. In August 2007, Dubai World announced that it would buy a 9.5% stake in MGM for about $2.4 billion USD and invest about $2.7 billion USD to acquire a 50% in MGM’s CityCenter project, a $7.4 billion USD, 76-acre Las Vegas development of hotels, condos and retail outlets due to open in 2009. In October 2007, Dubai World increased its offer $84 USD per share to acquire a stake in MGM Mirage. The sale was completed on October 18, 2007. Dubai World later bought further stakes. In June 2008, a syndicate of banks entered into a $5.5 billion USD syndicated loan agreement with Dubai World, the proceeds were used to refinance the $5 billion USD bridge loan.
Staff comments
1. The individual contributions of the 50 banks to this $5 billion USD syndicated loan are unknown. For now, AidData has estimated the contributions of ICBC (ASIA) by assuming that each bank contributed equally ($100,000,000 USD) to this syndicated loan. 2. Dubai World (迪拜世界) is an investment company that manages and supervises a portfolio of businesses and projects for the Government of Dubai. 3. Dubai World, one of three flagship holding companies of the Dubai Government, invested heavily in the real estate boom which burst in late 2008. Banks lent easily to Dubai World and its subsidiaries, assuming implicit government backing. After the global financial crisis, Dubai World’s refinancing needs soared as banks stopped lending. In November 2009, Dubai World said it would seek a delay on repaying $26 billion USD in debt, linked to its property units Nakheel and Limitless. The news caused global markets to tumble on fears that the Government of Dubai could no longer service its debts.