EMEA Loan: Port & Free Zone World's US$9bn acquisition financing

IFR Awards 2020
3 min read
Sandrine Bradley

Port authority

The US$9bn financing backing Port & Free Zone World’s take-private of port operator DP World stood out for its size, its complexity, and the fact it came at the height of market turbulence caused by the Covid-19 pandemic, which annihilated oil prices and impacted banks' cost of funds and risk appetite for Middle Eastern borrowers.

“It is the largest UAE financing and largest Middle East acquisition financing in over a decade. It is landmark in terms of its size and complexity,” said Zain Zaidi, a director who heads MENA loans and acquisition finance for Citigroup.

The privatisation is part of DPW’s wider strategy to transform itself from a port operator into an infrastructure-led global supply chain company and the financing was fully underwritten by Citigroup and Deutsche Bank as part of a highly complex deal including an M&A process, a take private, acquisition financing and the refinancing of Islamic loan tranches.

The deal also included the repayment of overhanging debt still sitting at parent Dubai World's level, which finally eliminated the legacy debt left over from its historic restructuring following the 2008 financial crisis.

“For us, this was the deal of the year – if not the deal of the last 10 years. I have never seen a deal like this in the region,” said David Garcia-Capel, head of investment-grade syndicate at Deutsche Bank.

On February 17, PFZW, also a subsidiary of Dubai World, announced its intention to delist DPW from the Nasdaq Dubai stock exchange after first acquiring the 19.55% of its shares it did not already own. The shares were acquired for around US$2.7bn, valuing DPW at around US$13.9bn. The transaction also involved the repayment of up to US$5.15bn of Dubai World debt.

The loan facilities comprised a US$2bn 12-month bridge facility, a US$2bn 18-month bridge facility, a US$2bn 24-month bridge facility, a US$1.85bn five-year term loan and a US$1.15bn five-year Islamic facility. The latter refinanced and rolled over existing Islamic facilities. DPW acceded to the new loans and became the borrower once the acquisition closed.

Despite market volatility the financing received strong support in the bank market and closed on its original terms without being flexed, with 12 banks joining across the conventional and Islamic phases of syndication.

“We got the conventional banks done in March and then signed in the Islamic banks in April when we were in throes of Covid lockdown -- it was the worst time in the market. It was quite something that we got it done,” said Zaidi.

Fears that the pandemic would impact DPW’s ability to repay the bridge facilities were swiftly allayed when a US$1.5bn hybrid bond was issued in July which was used to partially repay the loans.

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