The government of Dubai has raised a $1.1bn loan that will be used to extend the city’s metro rail system, completing the first step of an infrastructure financing programme which could total as much as $2.8bn, sources familiar with the matter said on Tuesday.
The $1.1bn is the commercial part of total funding required for the project; the remainder is expected to be obtained via loans guaranteed by export credit agencies (ECAs).
First Abu Dhabi Bank, HSBC, Intesa Sanpaolo, Santander and Standard Chartered have provided the loan, which has a 10-year tenor, said the sources.
A spokesman at Dubai’s department of finance declined to comment. The five banks did not immediately respond to requests for comment.
The loan will back the 15 kilometre (9 mile) extension of the Dubai metro towards the site of the World Expo, which the city will host in 2020.
The metro extension is one of a number of large infrastructure projects linked to development of the Expo’s exhibition centre, which will itself require some $7bn of financing.
Dubai is also expanding its Al Maktoum International Airport, for which it borrowed $3bn earlier this year and on which it plans to invest roughly $35bn in total.
The government approached banks for the metro expansion loan last year, asking for a commercial facility plus ECA-backed financing.
Dubai initially proposed a 10-year commercial loan with an interest rate margin of no more than 200 basis points over London interbank offered rates. The pricing of the final deal was not immediately known.