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Dubai seeking to improve terms on $1B loan: bankers

DUBAI: Dubai-owned port operator DP World is in talks with lenders to triple the size of an existing $1 billion loan, as well as extend its lifespan and cut its interest rate, in a bid to take advantage of investors’ renewed confidence in the emirate, according to bankers.

The firm, part of state-owned conglomerate Dubai World, is aiming to raise the loan to $3 billion, four banking sources said, speaking on condition of anonymity because the information is not public.

The original five-year revolving credit facility was signed in April 2012 and has already been renegotiated once, adding a year to the lifespan in June 2013.

“We undertake a regular annual review of our banking facilities as part of active financial management,” a spokesperson for DP World said when contacted by Reuters.

Discussions on the length of the new loan and the revised interest rate were ongoing, the sources said.

The existing margin on the loan is 225 basis points over the London interbank offered rate (Libor), according to Thomson Reuters data.

Lenders who funded the original loan included Barclays, Citigroup, Deutsche Bank and HSBC, according to the data.

Negotiating with banks to cut the margin on an existing loan has been a tactic employed by a number of Dubai’s state-linked firms in recent months.

Borrowing costs jumped in the wake of multibillion-dollar debt restructurings at government-related companies at the start of the decade, but have fallen significantly since, due to the emirate’s safe-haven status amid the turbulence of the Arab Spring, and the local economy subsequently rebounded.

Dubai’s tourism, transport and logistics sectors are booming, along with the stock market – up more than 50 percent since the turn of the year – and real estate prices – up 33 percent in the last 12 months.

The return of international banks to the regional loan sector, after their withdrawal to focus on home-market issues such as the eurozone crisis, and the abundant liquidity held by Gulf banks, has also depressed interest rates amid fierce competition for assets.

State-linked firms in Dubai have taken advantage of this in order revise terms on deals struck when rates were more expensive.

Last year, Dubai Duty Free and Emaar Properties, as well as a secured loan for the emirate’s Roads and Transport Authority that was backed by revenue from the Salik toll network were all renegotiated down, in some case by more than half their original cost.

 
A version of this article appeared in the print edition of The Daily Star on April 25, 2014, on page 6.
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Summary

Dubai-owned port operator DP World is in talks with lenders to triple the size of an existing $1 billion loan, as well as extend its lifespan and cut its interest rate, in a bid to take advantage of investors' renewed confidence in the emirate, according to bankers.

The firm, part of state-owned conglomerate Dubai World, is aiming to raise the loan to $3 billion, four banking sources said, speaking on condition of anonymity because the information is not public.

The existing margin on the loan is 225 basis points over the London interbank offered rate (Libor), according to Thomson Reuters data.

Lenders who funded the original loan included Barclays, Citigroup, Deutsche Bank and HSBC, according to the data.


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