Dubai Duty Free is planning to leverage its position as one of the biggest airport retailers in the world by raising a US$1.1 billion (Dh4.04bn) loan to spend on the development of Dubai International Airport.
The retailer has hired Citibank, Dubai Islamic Bank, Emirates NBD and HSBC to manage its first foray into the securitisation market, with the loan expected to be made up of a mixture of Islamic and conventional finance.
In a securitisation deal, the future cashflows of a company are packaged up, used as guarantees and sold to investors in return for loans.
Last year, the Dubai Government raised $800 million by selling the future cash flows from the Salik road tolls.
“I would expect that this type of thing will continue,” said Mark Watts, the head of fixed income at National Bank of Abu Dhabi’s asset management division. “You will see more and more innovative structures.” He said the weakened lending and bond market in the UAE since 2008 had forced some companies and government-related entities to seek financing through other means.
Dubai Airports last year announced it would invest $7.8bn in an airport expansion programme for Dubai International as it aims to boost its capacity from 60 million passengers a year to 90 million by 2018.
“The purpose of the facilities is to optimise [Dubai Duty Free’s] capital structure in order to support the further development at Dubai International Airport,” the airport retailer said.
Dubai Duty Free’s parent company is the Investment Corporation of Dubai (ICD), which is the investment arm of the Dubai Government. Dubai Airports is also within ICD.
It owns some of Dubai’s prime corporate assets, including Emirates Group, Emirates NBD, Dubai Islamic Bank, Emaar Properties and Dubai Aluminium.
Major businesses in the emirate have faced huge restructuring deals this year and many still have large refinancing needs.
Dubai Group, the financial arm of the Dubai Holding conglomerate, is in talks over $6.2bn of debt, and DIFC Investments faces repayment of a $1.25bn sukuk in June. Jebel Ali Free Zone has a $2bn Islamic bond due in November. But recent debt deals have provided optimism that debts due will be repaid or refinanced.
Both Dubai International Capital, the investment arm of Dubai Holding, and Drydocks World, the shipbuilding arm of Dubai World, last week managed to push through debt restructuring deals.
“The institutional market is gathering pace in the UAE and looking for different exposures. The more ways [companies] can satisfy that need, the easier it will be for any entity to raise finance,” said Mr Watts.
Retail is one area of the economy that lenders are interested in financing.
Last month, the jeweller Joyalukkas, based in Dubai, announced it had received a $100m loan for expansion. Nakheel, the developer of The Palm, is also confident it can raise hundreds of millions of dollars from banks to build retail assets in the Dubai.
Dubai Duty Free, which began trading in 1983, operates 18,000 square metres of retail space at Dubai International and made revenues last year of Dh5.3bn.
Total sales at the airport retailer were up 14 per cent to Dh1.42bn in the first quarter of this year, compared with the same period last year, and the retailer aims to make Dh6bn this year rising to Dh10bn within six years. It does not report earnings.
Dubai Duty Free employs more than 4,000 staff and claims to sell goods to about 47 per cent of all passengers that pass through the airport, handling 61,400 transactions per day.
It accounts for 5 per cent of global airport shop sales, according to Generation Research, an independent industry specialist.