Festival City to seek $1.1b loan

Dubai Festival City, which owns the district that’s home to Ikea and Hard Rock Cafe in the emirate, is seeking a $1.1bn loan to repay debt and help fund expansion, two people with knowledge of the deal said.

The company owned by Dubai’s Al-Futtaim Group plans to raise a 10-year, amortising facility from about eight to 10 banks, said the people, asking not to be identified because the information is private. The funding will be a secured, non-recourse financing, where banks won’t have access to cash from other businesses of the group in the case of a default, according to the people. A spokesman for Al-Futtaim said by telephone that he couldn’t immediately comment.

Companies in the UAE, the second-biggest Arab economy, are raising loans to take advantage of record-low interest rates and ample liquidity at banks. Emaar Properties, which owns one of the world’s biggest shopping malls in Dubai, obtained a $1.5bn, seven-year Islamic loan in May to replace older debt and fund growth, according to data compiled by Bloomberg.

The Al-Futtaim Group is one of the biggest family-owned businesses in the UAE that employs more than 20,000 people in over 70 companies, according to its website. Dubai Holding Commercial Operations Group, a unit of one of the emirate’s three main holding companies, owns 30% of Dubai Festival City, according to its 2013 annual report.

The three-month Emirates interbank offered rate, a benchmark used to price some loans, was at 0.68% yesterday, according to data compiled by Bloomberg. That is the lowest since at least 2006, when Bloomberg began collecting the data.

Dubai’s economy, the second-biggest of the seven that make up the UAE, is expected to grow at its fastest pace in seven years in 2014, according to forecasts from the International Monetary Fund. The growth is being driven by expansion in the emirate’s tourism, retail and property industries.

Dubai Festival City includes a shopping mall, hotels, residences and offices along Dubai’s creek.-Bloomberg