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Middle East loans hit record $151bn

LONDON: Syndicated lending in the Middle East rose 65 per cent last year to a new record of $151 billion as regional borrowing defied the credit crunch, according to Reuters Loan Pricing Corporation.

Borrowing in the region stayed on track in the second half of the year, while the effects of the subprime crisis started to curb syndicated lending in Western Europe and the US.

Middle East loans have traditionally been generated by financial institutions and project financing, but last year saw an increase in corporate borrowing and acquisition finance.

Corporate borrowing of $67bn accounted for 44pc of regional volume as companies secured bigger loans than ever before, pushing average deal size over $1bn last year compared with $496 million in 2004.

The majority of corporate borrowing backed merger and acquisition (M&A) activity as Gulf state-owned companies embarked on an international debt-financed acquisition spree last year.

Saudi Basic Industries Corporation (Sabic) bought General Electric's plastics business for $11.6bn backed by an $8bn leveraged loan in the largest foreign acquisition by a Gulf investor.

Borse Dubai made a $4.9bn joint offer with Nasdaq for Nordic exchange OMX backed by a $5.8bn loan and Dubai World borrowed $5bn to invest in Las Vegas.

Bankers expect even larger M&A financings to emerge from the region this year, which could produce record loans.

Telecoms was the most active sector in Middle Eastern borrowing last year.

Telecom companies took $32bn of loans to pay for licences or back consolidation and accounted for 21pc of all regional borrowing.

Saudi Arabian telecom Mobily agreed to the largest-ever Islamic loan in June of $2.875bn to back expansion plans, while Qatar Telecom's $3bn deal backed its 51pc stake in Kuwait's Wataniya.

The Egyptian unit of UAE's Etisalat agreed a $850m loan last month after winning Egypt's third mobile licence in 2006, while Kuwait's Zain won its bid for Saudi Arabia's third mobile licence with a $6.1bn bid funded by loans.

The telecom sector is expected to remain active this year, along with utilities and commodity resource companies, banking sources said.