Gov't official says advance payment of $165m has been paid to consortium of contractors for construction work
Dubai hopes to finalise $2.5 billion in fundraising this year for a 15 km (9 mile) extension of its metro to the World Expo site and has already started construction, a government official told Reuters.
"I hope it will be before the end of this year as we've started construction," Mattar al-Tayer, chairman and director general of Dubai's Roads and Transport Authority, told Reuters in an interview this week.
He said the government had already made an advance payment of 600 million dirhams ($165 million) to a consortium of contractors including France's Alstom, Spain's Acciona and Turkey's Gulermak.
Dubai's Department of Finance, which is in charge of raising funds for the project, has been giving banks feedback on their bids for its financing, banking sources told Reuters separately. The sources declined to say whether banks had been mandated for the project yet.
The project, worth some $2.9 billion, will run up about $2.5 billion in debt. Of this, about $1.5 billion is backed by export credit agencies (ECAs) and the rest is a commercial loan, they added.
The agencies backing the financing are France's Coface (COFACE) and Spain's Compañía Española de Seguros de Crédito a la Exportación (CESCE), a source close to the situation said.
The commercial loan has a ten-year tenor, while the ECA-backed financing has a maturity of about 18 years, banking sources said.
Last month about eight to ten international banks submitted bids, which included pricing indications for the financing.
As the borrower is government-linked, the pricing for the facility will be determined by Dubai's ten-year credit default swaps (CDS), which are about 210 basis points, according to Thomson Reuters data. The commercial part of the financing is therefore likely to price between 200 and 230 basis points over the London interbank offered rate (Libor), while the ECA-backed financing is expected to offer about 150 basis points over Libor, one banking source said.
The project will extend Dubai Metro's Red Line to the 2020 World Expo site.
The consortium of contractors was awarded a 10.6 billion dirham contract in June this year, including procuring 50 trains, 35 of them to upgrade the metro service and 15 for the World Expo service, according to a government statement.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.