DP World is in talks with its four banks to increase the size of its existing US$1bn loan to US$3bn, according to Reuters. In addition, the port operator is said to want to extend the lifespan and cut the interest rate on such a loan to take advantage of investors’ renewed confidence in the Emirate.
An original five-year revolving credit facility, signed in April 2012, has already been renegotiated once before when its lifespan was extended by a year in June last year. The banks funding the original loan include Barclays, Citigroup, Deutsche Bank and HSBC.
“We undertake a regular annual review of our banking facilities as part of active financial management,” a spokesperson for DP World told Reuters. Discussions on the length of the new loan and the revised interest rate were ongoing, the source said.
The existing margin on the loan is 225 basis points over the London interbank offered rate (Libor), according to Thomson Reuters data, which claimed that negotiations to cut the margin on an existing loan has been a tactic employed by a number of Dubai state-linked firms in recent months.
Borrowing costs jumped in the wake of multi-billion-dollar debt restructurings at government-related companies at the start of the decade. These have come down significantly since, due to the Emirate’s ‘safe-haven status’ as the region suffered the turbulence of the Arab Spring and the local economy rebounded.
According to the report from Reuters, Dubai’s tourism, transport and logistics sectors are booming, along with the stock market – up more than 50% since the turn of the year – with real estate prices increasing 33% 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 Euro zone crisis, and the abundant liquidity held by Gulf banks, has also depressed interest rates amid fierce competition for assets. Dubai state-linked firms have taken advantage of this to revise terms on deals struck when rates were more expensive.