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 the lifespan and cut the interest rate, seeking to take advantage of investors’ renewed confidence in the emirate. 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 as the information isn’t 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 include Barclays, Citigroup, Deutsche Bank and HSBC, the data showed. Negotiating with banks to cut the margin on an existing loan has been a tactic employed by a number of Dubaistate-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 but 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. 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 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. Last year, Dubai Duty Free, Emaar Properties and a secured loan for the emirate’s Roads and Transport Authority backed by revenue from the Salik toll network were all renegotiated down, in some case by more than half their original cost.