Emirates Global Aluminium, the UAE’s biggest industrial company outside the oil and gas sector, signed a $6.5 billion (Dh24bn) loan facility amid favourable credit market conditions.
“The refinancing of EGA’s corporate debt optimises the aluminium giant’s capital structure by reducing the cost of debt, creating more flexibility for repayment, and aggregating debt at the EGA level,” it said in a statement on Thursday. The loan is a senior unsecured facility with a seven-year maturity and a flexible repayment profile that allows EGA to manage its leverage and cash position.
In September, EGA delayed its initial public offering that was slated for 2018 due to unfavourable market conditions. Uncertainty regarding Brexit, a crisis in Italy and escalating trade war rhetoric between the US and China have rattled markets.
Abu Dhabi strategic firm Mubadala Investment Company is part owner of EGA alongside the Investment Corporation of Dubai, the emirate’s sovereign wealth fund.
“The term loan facility amends, extends and upsizes EGA’s existing $4.9bn term loan facility agreed in December 2015,” the company said. “The proceeds from the increase in facility size have been used to fully repay a $1.8bn term loan facility extended to EGA’s subsidiary Dubai Aluminium.”
EGA, among the world's five largest aluminium producers, is expanding its operations in the UAE and abroad. The company has projects aimed at securing all segments of the value chain, from a $1.4bn bauxite mine in Guinea to setting up a $3.3bn alumina refinery in Abu Dhabi, both of which will come on stream in 2019.
“While our existing loans do not mature till 2021-22, we felt the current market conditions offered an excellent opportunity to proactively optimise our maturity profile,” said Zouhir Regragui, EGA’s senior vice president for strategy, corporate development and capital markets. “We have been able to obtain very attractive financing terms and decrease our cost of capital.”
UAE monetary policy, like most countries whose currencies are pegged to the US dollar, mimics moves by the Federal Reserve. The Fed met on Wednesday and the central bank's chairman Jerome Powell said the case for raising interest rates further this year "has weakened." The Fed has hiked interest rates eight times since December 2015.