DP World Ltd., the world’s fourth-biggest port operator, started talks with banks for a loan to help pay half of a $3 billion credit facility maturing in October, a banker familiar with the discussions said.
The Dubai World-controlled company is talking to HSBC Holdings Plc, Standard Chartered Plc and Citigroup Inc. for a $1.5 billion loan, the banker said, asking not to be identified because the information is private. DP World, rated the lowest investment grade at Moody’s Investors Service and Fitch Ratings, will pay the remaining $1.5 billion with its own cash, he said. It secured the five-year revolving credit facility in October 2007 at a margin of 45 basis points over the London interbank offered rate, according to data compiled by Bloomberg.
Raising the money “shouldn’t be an issue as they have now been rated investment grade by two of the rating agencies,” Abdul Kadir Hussain, chief executive officer at Dubai-based fund manager Mashreq Capital DIFC Ltd., said in a phone interview yesterday. “They have come through a strong set of results, over the last year or so and they have pretty much ring-fenced themselves quite well from the Dubai World situation.”
DP World, which operates more than 60 terminals across six continents, is expanding operations in China, India and the Middle East as it seeks to boost capacity to 100 million twenty-foot equivalent container units by 2020, according to its website. The company said in December it will invest $850 million in the next three years to expand capacity at its flagship Jebel Ali port on the outskirts of Dubai.
A spokeswoman for DP World couldn’t be reached for a comment outside office hours. Officials at HSBC, Standard Chartered and Citigroup in Dubai declined to comment.
Dubai World roiled global markets in 2009 by announcing plans to delay payments on $25 billion of debt. It reached an agreement with creditors in March to restructure the loans.
Dubai and its related companies shoulder $129.3 billion of debt, amounting to 149 percent of GDP, of which $15.5 billion is due this year, according to Bank of America Corp. Merrill Lynch. The emirate, home to the world’s tallest tower, borrowed funds during a regional economic boom to turn itself into a financial, trade and tourist hub.
DP World handled 54.7 million TEUs at its ports last year compared with 49.6 million TEUs a year earlier, it said Jan. 31. It forecast full-year gross profit to be “in line with expectations” after reporting a better-than-expected 36 percent rise in first-half profit to $281 million.
DP World has $10.8 billion of debt and interest payments outstanding, according to data compiled by Bloomberg. The company had $4.1 billion in cash at the end of June.
The yield on the port operator’s 6.25 percent Islamic bond due in July 2017 fell three basis points, or 0.03 percentage point, to 5.43 percent yesterday, the lowest since Oct. 31, data compiled by Bloomberg show. The rate has dropped 49 basis points this year.
DP World is refinancing half of the outstanding credit facility, “so they are deleveraging,” Hussain said. “It’s positive for the credit.”
DP World agreed a 20-year financing with a group of international banks to fund its London Gateway deep-sea port, it said on Oct. 6. The company, which said it will invest an additional $1 billion in the project over the next three years, will use an equal mix of debt and equity to finance it.
Jebel Ali Free Zone FZE, a business park operator also owned by Dubai World, is in talks with banks for a loan to help pay a 7.5 billion-dirham ($2 billion) Islamic bond maturing in November, two people familiar with the matter said Feb. 7. Dubai Group, an investment company owned by the emirate’s ruler, offered to pay back creditors over five to 10 years as it seeks to restructure $6 billion of bank debt, a banker familiar with the proposal said on Feb. 6, asking not to be identified as the negotiations are private.
DP World’s shares fell 0.9 percent to $11 on Nasdaq Dubai today. They have risen 14 percent this year.