Dubai Duty Free Said to Seek $1.1 Billion Through Bank Loan

Dubai Duty Free is raising a $1.1 billion loan backed by the airport retailer’s future cash earnings and hired lenders including Citigroup Inc. to help with the plan, two bankers familiar with the deal said.

Dubai Duty Free’s parent, Investment Corp. of Dubai, the emirate’s main state-owned holding company, also mandated HSBC Holdings Plc., Dubai Islamic Bank PJSC and Emirates NBD PJSC to help with the fundraising, the people said, declining to be identified because the information is private. The five-year financing plan pays a margin of 3.5 percentage points over the London interbank offered rate, they said. A spokeswoman for Dubai Duty Free, who didn’t wish to be identified because of company policy, declined to comment.

Dubai Duty Free, which began operations in 1983, operates 18,000 square meters of retail space at Dubai International and is the world’s single-largest airport retailer based on 2010 revenue. It reported a 15.6 percent rise in 2011 revenue to $1.46 billion.

No one at Investment Corp. of Dubai was available to comment. Spokesmen for Citigroup, HSBC and Emirates NBD in Dubai, who didn’t wish to be identified because of company policy, declined to comment. A spokesman for Dubai Islamic Bank couldn’t immediately be reached for comment.

Dubai Recovery

Dubai, the second-biggest of the seven emirates that make up the United Arab Emirates, is recovering after the global credit crisis pushed property prices down by more than half from 2008 peaks, and frozen credit markets forced some state-owned companies to delay loan payments. The emirate had to borrow $20 billion from the central bank, the Abu Dhabi government and its banks to help state-owned companies through the crisis.

Dubai Airports, home to the biggest Arab airline Emirates, reported a 19 percent jump in passenger traffic in February from a year earlier to 4.56 million. Total passenger traffic in 2011 grew 8 percent to 50.98 million, making it the world’s fourth-busiest airport by international passenger and cargo traffic, Airports Council International data show.

Dubai’s default risk has declined as the prospects of debt repayments by state-owned companies improves. Five-year credit defaults swaps for Dubai were at 334.5 basis points yesterday, down 25 percent this year and outpacing the 14 percent average decline among Persian Gulf nations, according to data provider CMA. CMA is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The contracts pay the buyer face value if a borrower fails to meet its obligations.

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