Emirates Global Aluminium PJSC (EGA) announced this week that it has entered into a new US$137.5 million revolving credit facility that is tied to the new Term Secured Overnight Funding Rate (SOFR).
Per the firm, SOFR is an emerging replacement for the long-standard US dollar London Interbank Offering Rate. Though long accepted as the gold standard of lending rates, critics have in recent years accused the Rate as being unfairly manipulated.
The new loan is among the first syndicated corporate credit facilities indexed to SOFR in the Middle East. SOFR utilizes data from observable transactions to establish a benchmark interest rate, contrasting with LIBOR’s use of disclosures from a few major banks.
The loan will be utilizing the Chicago Mercantile Exchange SOFR forward rate as well. Banks involved in the credit facility include Abu Dhabi Commercial Bank, Emirates NBD, and Commercial Bank of Dubai.
EGA Chief Financial Officer, Zouhir Regragui, said in a related press release that the new credit facility puts his firm in a better place for managing its debt.
“EGA has broken new financial ground in the Middle East with this Term SOFR facility, and this is an example of how to manage the global transition to this new benchmark. The facility itself, like the one it replaces, will enable us to continue our robust and structured approach to managing our short-term working capital and liquidity position.”
Altogether, EGA maintains a total of US$737.5 million in revolving credit facilities.
Based in Abu Dhabi, United Arab Emirates, Emirates Global Aluminium is an aluminium conglomerate created by the merger between Dubai Aluminium (DUBAL) and Emirates Aluminium (EMAL) in 2013. EGA had an estimated enterprise value of US$15 billion at the time the merger took place. The firm is owned equally by Mubadala Development Company of Abu Dhabi and Investment Corporation of Dubai. Emirates Global Aluminium holds interests in bauxite/alumina and primary aluminium smelting.