Dubai’s Department of Finance (DoF) has started talks with banks to try and reduce the pricing it pays to banks on its $800m securitisation of receipts from the Salik road toll.

The informal talks follow the news that the bank group on the deal rejected a previous request from the DoF for a 100 basis points reduction in the margin from the current level of 325 basis points above the London interbank offered rate (Libor) that was agreed when the loan was first put in place in 2011.

After banks refused the request, the DoF had been expected to try and refinance the deal in order to get better terms, but banks in the existing transaction say that the DoF has instead started to have one-to-one discussions with them to negotiate a reduction in the pricing.

“At the moment the DoF is approaching banks to gather their views on where they think pricing should be,” says one banker involved in the deal.

“If they took this deal to the market today they would get it a lot cheaper as the current pricing is quite high. There is likely to still be some resistance to dropping the pricing as much as they would like though,” says another lender on the deal.

According to the bankers, the DoF has not yet indicated a timeline for concluding the negotiations of the Salik deal, and may yet decide to refinance it and raise additional money.

Lending rates to Dubai have dropped significantly over the past 12 months as the emirate’s economy has returned to growth after its debt crisis in 2009 that led to the restructuring of a large part of its $110bn debt pile. A government sukuk (Islamic bond) issue in January of $1.25bn was massively oversubscribed by investors, and a raft of other Dubai entities have begun talks to issue new bonds or refinance old loans to capitalise on improved sentiment towards the emirate.