Dubai The Dubai Department of Finance announced Wednesday that it has completed dual currency financing of $675 million (Dh2.48 billion) to complete phase 1 of the construction of the Al Sufouh Tram project.
Earlier this month, the Roads and Transport Authority (RTA) awarded a 13-year maintenance contract for the Al Sufouh tramway to a consortium comprising Alstom and Cofely Besix Facility Management (FM).
The contract is worth €120 million (Dh583.19 million), including €68 million for Alstom, the consortium's leader, and €52 million for Cofely Besix FM.
The first phase of the project involves the construction of a 10-kilometre track starting from the Dubai Marina and running to the Knowledge Village.
Two tranches
The financing deal comprises a 13-year $401 million loan which will amortise over 10 years, starting 2015, and is guaranteed by the official government export credit agencies of Belgium (The Office National du Ducroire or ONDD) and France's COFACE.
The second portion of the transaction is a six-year $274 million Islamic Ijara facility, split equally in dollars and dirhams, and amortising over three years, also starting 2015, according to a statement from the Department of Finance.
"We have seen a very encouraging response to this financing, which is a testament to the strong confidence that international banks have in Dubai's economy, and the vision of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai," Abdul Rahman Saleh Al Saleh, Director General of the Department of Finance, said.
Improving sentiment
Analysts said Dubai's ability to diversify funding sources and raise funds in the international market points to the improving investor perception of Dubai and the UAE.
In July last year, RTA closed an $800 million financing deal with lenders based on securitising road toll receipts.
"Recent developments relating to Dubai's ability to meet debt maturities indicate that there is no doubt that lots of improvements have been achieved in terms of building credibility. Certainly, there is scope for more," Jean-Michel Six, Standard & Poor's chief European economist, told Gulf News in a recent interview.
Bank of America Merrill Lynch said in a recent report that it believed that Dubai will manage its funding requirements and upcoming 2012 debt maturities.
Al Saleh said yesterday that the Dubai Government is continually examining ways to optimise its funding strategy. He said that export credit agencies' (ECA) financing is a good proof of the success of this strategy.
"Through ECA, we have been able to achieve long-term financing at competitive rates while continuing to efficiently manage the emirate's finances," he said.
Citibank, Deutsche Bank and HSBC acted as mandated lead arrangers and underwriters for the financing.
