Middle Eastern firms agreed syndicated loans worth $54 billion in the first half of this year, up from $44 billion the same period last year, despite the global credit crunch, according to Reuters Loan Pricing Corporation.

There was a raft of large loans, including a $5.5 billion deal for state-owned investment group Dubai World and $3 billion loans for Borse Dubai and Abu Dhabi utility Taqa.

Multi-billion project loans were agreed, including $13 billion worth of financing for state-owned Saudi mining firm Maaden's phosphate mining venture, Sabic's Saudi Kayan petrochemicals scheme and Emirates Aluminium, which helped push up volume.

Middle Eastern companies secured $35 billion in corporate loans in the first half of this year, 25 per cent up from $28 billion year-on-year.

Islamic loans in the Middle East totalled $9 billion in the first half, matching the volume for the same period last year.

While the region's borrowing volume figures are healthy, driven by state-backed firms on the trail for acquisitions, the global credit crisis means borrowing costs have increased in the Middle East.

Bankers in the region say they are facing challenges to price deals as market expectations have gone up considerably.

State-backed Dubai World's $5.5 billion loan paid margins ranging from 135-185 basis points (bps) over Libor, a lot higher than a high calibre Western European borrower would pay, bankers said. For example, Europe's largest entertainment group Vivendi paid a margin of 32.5-40 bps for its recent 3.5 billion euro ($5.5 billion) loan.

Dubai World's deal also allowed banks to commit in US dollars or dirham-equivalent, which has become a common strategy for selling loans in the region this year since there is a shortage of dollars among Gulf-based banks, stemming from the credit crisis and uncertainty over local currency pegs.

A banking source said around 22 per cent of the total $5.5 billion was committed in dirhams.

Taqa's $3 billion loan and Dubai-based telecom company du's debut Dh3 billion loan, currently in syndication, also allows commitments in either currency.