Dubai Duty Free Said to Seek Loan Price Cut on Default Risk Drop

Dubai Duty Free aims to lower the interest on a $1.75 billion loan by as much as 31 percent after Dubai’s default risk plunged since the financing was signed last July, a banker familiar with the deal said.

State-controlled Dubai Duty Free, the world’s biggest airport retailer, raised the six-year syndicated loan from a group of 26 banks and has asked them to reduce interest on the dollar portion by 75 basis points, or 0.75 percentage point, over the benchmark rate, said the banker, asking not to be identified because the information is private. It has asked the margin on the dirham tranche be cut by 100 basis points, he said. Both portions paid a margin of 325 basis points.

A spokeswoman for Dubai Duty Free didn’t comment when called by Bloomberg News. Reuters reported the story earlier.

Dubai’s five-year credit default swaps, which measure the risk that a government loan won’t be repaid, plunged 34 percent over the past year as three state-controlled companies successfully repaid or rolled over about $3.75 billion of debt. The contracts fell to 236 on July 1, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Abu Dhabi Commercial Bank PJSC (ADCB), Abu Dhabi Islamic Bank PJSC (ADIB), Citigroup Inc. (C), Dubai Islamic Bank PJSC (DIB), Emirates NBD PJSC (EMIRATES) and HSBC Holdings Plc. (HSBA) helped Dubai Duty Free obtain the loan. Spokesmen for Citigroup, Emirates NBD and HSBC Holdings declined to comment, while spokesmen for Abu Dhabi Commercial Bank and Dubai Islamic Bank couldn’t immediately be reached.

Dubai Duty Free, which opened in 1983, operates 18,000 square meters of retail space at Dubai International Airport. Its revenue rose 10 percent in 2012 to $1.6 billion.

Dubai, the second-biggest of seven states that make up the United Arab Emirates, is recovering after the global credit crisis pushed property prices down by more than half from their peak in 2008. Dubai Airports, home to Emirates, the world’s biggest airline by international passengers, reported a 19 percent year-on-year increase in travelers in May to 5.22 million.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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