Dubai-based district cooling company joins refinancing trend amid favourable rate cuts.
PC: Economy Middle East
Dubai-based district cooling provider Empower has filed for a proposal for refinancing a Dh2.75 billion loan with a new three-year unsecured loan facility. The move comes as the prevailing interest rate-cut scenario has seen other major companies in the UAE do it, and it marked the second significant listed company in the UAE to confirm a refinancing effort under these favourable market conditions.
A new loan facility would look to refinance the debt currently held by the company; that in turn will make its financial position stronger and better at managing cash flows. Thus, under prevailing interest rate environments, a three-year facility in place would contribute to low borrowing costs.
UAE Companies Eye Refinancing Amid Rate Cuts
Empower has decided to follow another major player in the UAE business scenario-the AD Ports Group-which announced that it was also opting for refinancing. Both the companies cited the latest cuts in US Federal Reserve interest rates as reasons for their respective decisions. The Fed actions have shaken global borrowing costs down, and in this atmosphere, the time seems just right for debt restructuring of corporations.
As such, AD Ports Group, as in the case of Empower, saw a chance to refinance loans and obtain better terms regarding existing loans. These represent a broader trend in UAE firms looking to take advantage of more favourable financial conditions spurred by global interest rate adjustments.
Strategic Financial Management
By opting for refinancing at this juncture, the company has engaged in prudent management of its finances by way of optimising the structure of its debt. In the future, refinancing would no doubt reduce the cost of borrowing for the entire company while upgrading its liquidity status and giving more flexibility in dealing with its financial obligations.
Another is that there are rising global economic uncertainties and pressure through inflation forcing companies like Empower to enhance its financial position. Locking in such low rates in such times will protect companies from escalations of interest costs over time thereby further driving the opportunity of these refinancing exercises.
A Wider Market Trend
Recent refinancing decisions by Empower and AD Ports Group, for instance, confirm companies in the UAE are keeping track of every twist and turn in financial indicators around the world and already adjusting their strategies to benefit from them. Of course, this trend will continue to raise businesses’ pursuit of taking advantage of the profitable lending environment to build a solid financial footing towards long-term stability.
There has been a ripple effect of change in Federal Reserve interest rate policies that had affected various strategies companies were employing to finance themselves, and the UAE firms are no exceptions. Working quicker than others, firms such as Empower are positioning themselves to remain competitive in their ventures in an effort to help cut risks of volatile economic conditions.
