The Port of Fujairah is tapping the bank market for financing to support its expansion plans.

A AED754m ($205.3m) club financing facility is being arranged on a club basis through four banks, which will be used by the port for the construction of a breakwater and a jetty for very large crude carriers (VLCCs), say banking sources.

It currently has yet to reach documentation stage, but is expected to close before the end of the year.

The port raised its first syndicated loan to support its expansion in 2008, when it secured a AED900m facility through mandated lead arrangers National Bank of Fujairah and Commercial Bank of Dubai. The deal was syndicated to 13 local and international lenders.

In contrast, this latest loan is being arranged on a club basis, meaning no single bank takes the sole responsibility of underwriting the deal and then selling it down to the syndication market.  

Since the financial crisis in 2008-09, club deals have become the prevalent method of raising money as opposed to syndicated facilities.

Fujairah is the only emirate situated on the Gulf of Oman and its port enjoys the strategic advantage of being positioned outside the congested and politically sensitive Strait of Hormuz.

The seaport has the added advantage of having deep waters that allow access to large VLCC ships, which has enabled it to be a major regional and global bunkering point for cargo ships to refuel and restock.

The Habshan-Fujairah crude pipeline, opened in 2012, has enhanced the port’s key role in positioning the emirate as a major oil supply hub.

The pipeline can transport up to 1.8 million barrels a day (b/d) of Abu Dhabi’s oil production to Fujairah.

The new jetty, coupled with the other expansion plans, will improve the port’s capacity to handle VLCC ships and increase its strategic importance.