Dubai said to arrange $3 bln loan to fund airport expansion

Dubai has arranged a $3 billion loan with banks to fund the expansion of the Dubai World Central airport and logistics hub, Bloomberg reported, citing unnamed people familiar with the matter.

The expansion plan comes as the emirate prepares to host World Expo in 2020.

Dubai will pay an interest of 200 basis points, or 2 percentage points, above the London Interbank Offered Rate on the seven-year facility, the people said.

It will also pay a one-time fee of 85 basis on the loan value, they added.

HSBC Holdings Plc is said to be advising the government and an agreement should be signed within weeks.

The loan includes a $2 billion conventional tranche and an AED 3.67 billion ($1 billion) Islamic portion and is being raised by a special-purpose company to pay for the expansion project, Bloomberg reported. The government will pay a margin of 200 basis points over the Emirates Interbank Offered Rate on the Islamic facility.

The special-purpose company will be paid by Dubai’s department of finance based on a formula linked to passenger numbers at the city’s two airports.

Dubai International Airport is already the world’s busiest by international passengers. The emirate is developing Al Maktoum Airport close to the Expo 2020 site with an annual capacity of about 220 million passengers and plans to move flagship carrier Emirates by 2025.