du tackles debts with $220m loan

Du successfully refinances its upcoming loans, but analysts say the company will require further financing as it ups the ante in its battle with Etisalat.

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The telecommunications company du has secured a new round of financing that will help it to meet a Dh3 billion loan that comes due at the end of this month.

The three-year loan facility is worth US$220 million (Dh808m) for du, which is seeking to expand in Etisalat's stronghold of Abu Dhabi. The size of the loan, worth about a quarter of the amount due for repayment this month, has raised questions about du's future capital needs.

"This facility is the latest part of our financing strategy, and further strengthens the company's financial and operating position," said Osman Sultan, the chief executive of du.

The company will use the proceeds to pay off the rest of its debts coming due this month, the company said in a statement to the Dubai Financial Market, although it will also need to dip into its cash resources.

According to du's financial statements, the company remains well-financed, with Dh2.9bn in cash and near-cash items on its balance sheet at the end of March.

"We're not surprised with this loan - it was already expected in our forecasts," said Mohamed Hamdy, a telecoms analyst at CI Capital Holding. "The surprise was the size."

More funds could be needed to help du finance its operational and capital expenditures in the months ahead, Mr Hamdy said. "I'd expect the company will seek another round of financing from other banks at better rates. But at least this will [help to] repay the existing loan.

"The company needs a huge amount of capital for infrastructure."

In the past year du has embarked on several efforts to raise capital as it seeks to up the ante against Etisalat, its rival telecoms provider.