Emirates Global Aluminium in talks for $5bn loan to refinance debt – sources

State-owned Emirates Global Aluminium (EGA) is in talks with banks to raise a $5bn loan, four banking sources aware of the matter said on Wednesday, to refinance debt taken on for some of its projects.

EGA, created by the merger of two state-owned aluminium companies Dubai Aluminium (Dubal) and Abu Dhabi’s Emirates Aluminium (Emal), is jointly owned by Abu Dhabi investment fund Mubadala and the state company which holds Dubai’s most high-profile assets, Investment Corporation of Dubai (ICD).

The company is seeking funds to refinance loans taken for the Emal projects, the sources said. The $5.7bn Emal Phase 1 project was commissioned in 2009 while the $4.5bn phase two was commissioned in 2014.

A significant part of the projects’ funding was through bank loans and the original funding was put in place in 2008.

EGA declined to comment.

The company is now talking to local and international banks to consolidate their existing debt into a single loan at improved costs, according to the banking sources, who declined to be identified because the information is not public.

Given the projects have been operational, they now have financial track records which banks can use to base their lending decision against — meaning the new debt should be priced at a much cheaper rate than the original project finance which had included risks relating to construction and getting the scheme up and running.

“The original borrowing had an equity component which has been retired and EGA is looking to consolidate the multiple loans taken for the projects so far at improved costs,” one of the sources said, adding that this time EGA will be the borrower and not Emal.

EGA is hoping to close the club loan by the end of first quarter 2016, the sources said, with one adding that the company is seeking a loan with a life span of between 12 and 14 years.

In June, the company announced 4 per cent job cuts as part of a strategic restructuring to reduce costs and boost operational efficiency.

Aluminium production in the Gulf has been relatively resilient despite China, producer of about half the world’s primary aluminium, boosting exports and staring down prices. Lower prices are forcing companies to improve efficiency but trimming cost.

Production of the metal has been rising rapidly in the Gulf, partly because of the region’s low energy costs and extensive port facilities, as well as its booming construction industry.

Earlier this year, EGA said its exports would fall to 77 per cent of its production by 2017 as a result of a rise in local demand.

EGA produces 2.4 million tonnes per annum (mtpa) (combined production of Dubal and Emal) which makes it among the top five largest primary aluminium producers in the world. It also owns Guinea Alumina Corporation, a bauxite mine and alumina refinery project in west Africa.