Dubai raises USD 800 million to fund RTA projects

ubai has completed an USD 800 million financing facility based on future revenues from Salik tolls that will be used to fund the emirate's infrastructure projects. This huge spending in infrastructure projects would create a lot of jobs and also contribute to the growth of Dubai significantly.

As per report, the deal was completed on July 5th 2011 and the response was strong enough to allow the government to reduce the margin to 325 basis points above the London interbank offered rate from 350 basis points.

The Dubai Department of Finance said in April that it would launch 6 year dual currency financing based on receipts from the emirate's road toll system, known as Salik to fund its projects under the Roads and Transport Authority or RTA.

The department said that all proceeds of the financing will be used to support the RTA’s infrastructure projects. Emirates NBD along with Commercial Bank of Dubai, Citibank and Dubai Islamic Bank are managing the transaction.

Mr Suresh Kumar CEO of Emirates NBD Capital said that 'We will launch it early next week and hope to complete it in less than a month. We expect to receive very good response from the region and international community.'

Mr Kumar said that this is the first of its kind in terms of creating financing instrument which will effectively monetize future cash flow from Salik toll gates. It's good for the economy, Dubai the banking sector and also for the capital market. It's not credit risk driven but cash flow driven. It will attract more such instruments coming to the market.

Last year, the RTA which also operates the first metro system in the Arab world, received AED 800 million in Salik revenues. The authority's revenues from Salik tolls are raising YoY as it earned AED 778 million in 2009 and AED 669 million in 2008. The authority is also planning to increase Salik toll gates in the emirate which are four at the moment.

The RTA is looking for different options to fund its project projects in the emirate. In May an executive of the RTA said the authority is planning to spend AED 20 billion in 4 years for projects and may also issue bonds to fund futures ones.

The RTA, which has spent more than AED 55 billion in the past 5 years is not considering hiking Salik toll charges for funding the projects but will look to create public private partnerships.

Recently, the RTA said that it would seek private funding for almost a third of its infrastructure projects over the next five years in a bid to spread the cost and risk of large projects.

(Sourced from khaleejtimes.com)