Atlantis the Palm will pay an initial interest rate of 5.5 per cent to raise an US$850 million syndicated loan, according to two people familiar with the deal.
Atlantis the Palm raising $850m loan
Atlantis the Palm, a resort located on an artificial island off Dubai's coast, will pay an initial interest rate of 5.5 per cent to raise an US$850 million syndicated loan, according to two people familiar with the deal.
Interest on the loan will be linked to leverage and will be reduced as the debt decreases or as the hotel's Ebitda, or earnings before interest, taxes, depreciation and amortisation, improves, said the people, who asked not to be identified because the information is private. The margin on the facility, whose tenor will be just over five years, could fall to about 3 per cent within two years, one of the people said.
Atlantis, which spent $20m on its opening party in 2008, will use the debt to refinance a $700m 12-year term loan arranged in 2005 to fund construction. The resort hired Abu Dhabi Commercial Bank, Barclays, Commercial Bank of Dubai, HSBC Holdings, National Bank of Abu Dhabi, and Union National Bank to organise the new facility.
The hotel, themed on the myth of the lost city of Atlantis, is owned by Dubai World unit Istithmar World. Istithmar spent $250m last year to buy the 50 per cent stake it did not already own from Kerzner International Holdings. Istithmar officials did not immediately reply to an e-mail sent via its website seeking comment on the financing.
The $1.5 billion Atlantis resort opened on an outer frond of Dubai's palm tree leaf-shaped island at the peak of the global financial crisis in November 2008, just as Dubai's property industry started to crash.
The emirate's borrowing costs have dropped as its tourism, hotel and transport industries recover from the crash, which sent home prices plunging more than 65 per cent from a mid-2008 peak. The Dubai government in January sold $750m of 10-year Islamic bonds at 3.875 per cent, 40 per cent less than it paid on sukuk almost a year earlier.
* Bloomberg News