UAE-based MSS operator Thuraya has secured a five-year US$50m loan in its first major Islamic financing deal.
Speaking to SatelliteFinance after signing off the debt with Dubai Islamic Bank (DIB) today, CEO Samer Halawi said the proceeds will go…
UAE-based MSS operator Thuraya has secured a five-year US$50m loan in its first major Islamic financing deal.
Speaking to SatelliteFinance after signing off the debt with Dubai Islamic Bank (DIB) today, CEO Samer Halawi said the proceeds will go towards network upgrades and expanding its product portfolio.
The loan will replace a more conventional US$47m facility due late 2014 that the operator had with a group of banks.
DIB was founded in 1975 and claims to be the first Islamic bank to have incorporated the principles of Islam in all its practices.
This means it does not deal with traditional interest payments for the loans it provides and avoids lending to companies considered contrary to Islamic principles, such as many in the entertainment industry.
Sharia compliant finance is therefore particularly suited for the telecoms sector, with banks being able to link their return to a company’s assets – in Thuraya’s case its ground infrastructure.
Other than differences in terminology, Halawi said the DIB loan is very similar to the traditional financing it has on its balance sheet, including the fixed monthly payments it has agreed to make for the new loan.
As for why Thuraya chose to go down the Islamic financing route, Halawi pointed to attractive ‘rates’ that are currently open to companies that banks like DIB are able to lend to.
“There’s liquidity in the market today that was looking for a destination – so it was a good win-win situation,” he explained.
In a statement announcing Thuraya’s new loan, DIB deputy CEO Adnan Chilwan said: “The renewed growth in the UAE economy and a positive outlook in the region, have prompted large corporations to once again invest in their infrastructure in order to capitalise on the new market opportunities.
“DIB is perfectly positioned to play its traditional role of supporting the growth and development of businesses in the UAE. Our strength and expertise enables us to structure complex financing deals tailored to the specific needs of our customers. This makes DIB the preferred partner for fuelling the growth of progressive companies like Thuraya.”
Thuraya’s more conventional 2014 facility was the result of a recapitalisation last year with its four main banks – the UAE-based Emirates NBD, Commercial Bank of Dubai and Union National Bank; and Amsterdam-based ING – which came amidst signs of a turnaround in revenues following five years of consecutive decline.
It ended up posting a 4% rise in revenues for 2012, and Halawi said the company will be in a good position next year to make payments in cash, adding that there was no urgency to refinance this facility.
However, Thuraya is still open to raising more debt as the company marches ahead with a new portfolio of products, which includes a satellite adaptor for smartphones called SatSleeve
“We are looking for other things we can do also on the financial side,” he said.
Thuraya recently launched a voice-only version of SatSleeve, and plans to release a voice and dataproduct later this year after an initial batch of 5000 were pre-sold to its service partners.
In addition to this, Halawi said Thuraya’s debt facilities will support an aggressive US$42m capex programme that it has in place over the next few years.
