Dubai’s Top Bank Is Said to Raise Gulf’s First Sustainable Loan

Emirates NBD PJSC is raising around $1.75 billion in the Gulf region’s first sustainability-linked loan to refinance existing debt, according to people with knowledge of the plans.

Dubai’s biggest bank has shaved off about 25 to 30 basis points in the overall cost of the three-year loan, two of the people said, asking not to be identified because the information is private. Emirates NBD’s existing three-year facility came at an all-inclusive cost of 97.5 basis points over Libor.

Nearly 20 banks are participating in the loan, the people said. Emirates NBD has linked sustainability metrics including gender diversity in top management roles and water conservation to the loan. A spokesperson for the Dubai lender declined to comment.

Sustainability-linked loans tie deal spreads to borrowers’ performance in environmental, social and governance goals that can be measured by key performance indicators or external ESG ratings. Such deals include so-called margin ratchets, which will see companies pay less if they hit specific goals, or more if they miss their targets.

Elsewhere in the Middle East, Turkish banks such as Akbank TAS and Garanti BBVA have also been tying their foreign-currency loan margins to sustainability goals. Global sustainability-linked loan sales have jumped 90% this quarter to $60 billion from the same period last year as more borrowers across all sectors embrace the booming trend.

Bank Outlook

Liquidity among banks in the six-nation Gulf Cooperation Council is improving as economies recover with a rebound in oil prices while the coronavirus pandemic subsides.

Emirates NBD has about $5.7 billion of debt maturing this year, according to data compiled by Bloomberg. The bank’s profit slumped by more than half in 2020 and impairment allowances increased by 65% as lockdown restrictions paralyzed businesses and disrupted travel to the Middle East’s commercial hub.

Although the hit to earnings was less severe than expected, the lender is now bracing for the withdrawal of regulatory forbearance and support measures later this year.

©2021 Bloomberg L.P.

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