Dubai close to finalising $800m Salik deal

19 May 2011

Securitisation of Salik toll receipts gets strong response from banks

Dubai is close to completing an $800m loan deal secured by receipts from the Salik road toll system operating by the Roads & Transport Authority (RTA).

The loan is being raised by the Dubai Department of Finance through a special purpose vehicle called Salik 1. The debt will have a tenor of six years and will pay a margin of 350 basis points above the London interbank offered rate (Libor).

The deal is expected to close by the end of the month and so far commitments from banks add up to around $1.2bn, according to sources close to the deal. It is still unclear if the deal will be increased in size.

After launching the deal in early April, banks were given until early May to respond with loan commitments. However, several banks asked for an extension until mid-May to finalise their commitment levels.

The US’ Citigroup is arranging the deal along with local banks Emirates NBD, Commercial Bank of Dubai and Dubai Islamic Bank. Proceeds from the deal will be used to fund other infrastructure projects in the Emirate.

Securitisation involves using steady income streams as security on loans to help lower the cost of borrowing. Dubai Electricity & Water Authority has previously completed two securitisations based on the income it receives from utility bills.

Dubai is expected to use the securitisation of its revenues from well-performing state-owned assets as a means of raising cash will it tries to overcome its debt burden, estimated at more than $100bn, well above the emirate’s annual GDP of about $80bn.

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