DP World $1 bln loan attracts big demand, March deal seen

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By David French and Michelle Meineke / Reuters

DUBAI: DP World, the world’s third-largest port operator, has attracted strong demand from both local and foreign banks for a $1 billion loan it wants to raise to help refinance a $3 billion facility maturing in October, bankers told Reuters.

While the bank group is not expected to be finalized for another week, according to a source at an international bank, it is expected that as many as ten institutions will be involved — with the split slightly favoring foreign — another, London-based, banker said.

Among lenders who have already agreed to participate are Citi, Deutsche Bank, HSBC, Societe Generale and Standard Chartered, banking sources confirmed.

Despite pricing on the five-year transaction being described as tight by bankers — the margin is 225 basis points — the quality of the creditor is the main driver behind demand.

“It is one of the better Dubai entities so there always going to be good take-up, both from locals and large international names,” said a UK-based banker.

DP World’s original $3 billion loan was arranged by Barclays, Citi, Deutsche Bank and Royal Bank of Scotland in 2007 and paid a margin of 45 bps over LIBOR.

The remaining $2 billion will be repaid by the company out of internal cash reserves — DP World has $4 billion of cash on its balance sheet, Yuvraj Narayan, its chief financial officer, said in January.

Despite the withdrawal of French banks from the Middle Eastern loan market in recent months due eurozone debt woes, the presence of Societe Generale on the deal shows they are still willing to back key relationships.

Abu Dhabi’s International Petroleum Investment Company recent $850 million loan also featured a French lender, BNP Paribas — helped by the borrower accepting euros as well as dollars.

Bank of America Merrill Lynch is also said to be interested in the DP World deal but their participation is now in doubt, sources said.

According to two bankers, the American bank has had issues getting internal approval for the transaction. The London-based source cited an issue with the loan’s structure but declined to give details. If not overcome, the bank could end up lending to DP World on a bilateral basis, he added.

Local lenders sign up

Among local banks, Emirates NBD has committed, while Abu Dhabi Commercial Bank is also likely to be in the final deal, the London-based source said.

Other local banks, who have existing relationships to either DP World or its parent company, Ports and Free Zone World, are also looking at the deal, with one or two likely to join before the deal closes.

The transaction, which is being self-arranged by the borrower, is likely to close before the end of March, the international banker said.

Fitch Ratings, which affirmed DP World at BBB- on Thursday, said the company did not plan to draw on the cash raised by the loan during 2012.

The agency said its rating was supported by the firm’s strong position in growing markets and its strong liquidity position and record in generating cash from its operations. The cyclical nature of the container industry was a constraint.

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