Dubai raises $1.1 bln loan for metro expansion: report

Dubai’s government has raised a syndicated loan worth $1.1 billion that will be used to extend the city’s metro system, Reuters reported on Tuesday, citing unnamed sources familiar with the matter.

The facility, which has a 10-year tenor, was arranged by First Abu Dhabi Bank, HSBC, Intesa Sanpaolo, Santander, and Standard Chartered.

The $1.1 billion loan is the commercial tranche of total $2.8 billion funding required for the project. The remainder is expected to be obtained via loans guaranteed by export credit agencies (ECAs).

The loan proceeds will be used to start the 15 kilometer (9 mile) extension of the Dubai metro to the site of the World Expo, which Dubai will host in 2020.

Last year, the government approached banks for the metro expansion loan, asking for a commercial facility, plus ECA-backed financing.

It specified that the commercial loan had to carry an interest-rate margin of no more than 200 basis points (bps) over London interbank offered rates, with banks’ up-front fees capped at 50 bps, commitment fees at 40 bps and underwriting fees at 25 bps.

The metro system extension comes as part of several large infrastructure projects linked to development of the Expo’s exhibition center, which will itself require some $7 billion of financing.