DXB Entertainments strikes accord with creditors to restructure Dh4.2bn

Dubai theme park operator reaches deal with majority shareholder Meeras for Dh1.2bn facility in form of convertible bond

DXB Entertainments reaches financing deal with majority shareholder Meraas. Courtesy of Dubai Parks and Resorts.

DXB Entertainments, the theme park operator of Legoland in Dubai, does not plan to cut costs further even as the company secured a Dh1.2 billion instrument from its major shareholder and restructuring its Dh4.2bn debt, its chief financial officer said on Monday.

"From a management perspective, we now are comfortable that we are at a level where the cost base is appropriate to the business," said John Ireland. "If the visitation picks up there is always an incremental component [to cost]."

The Dubai-listed company, in which property developer Meraas holds a 52.3 per cent stake, said on Monday it had agreed with creditors on a three-year moratorium on principal repayments for its Dh4.2bn debt and secured Dh1.2bn from Meraas. An existing Dh700 million facility from Meraas, the majority of which has not been utilised, will be rolled over into the  instrument, which is convertible into equity. Mr Ireland said that both debt deals “will bring the business to its targeted [cashflow] breakeven,” without giving a timeline.

DXBE, which began opening its attractions on a staggered basis in 2016, posted a wider-than-forecast loss of Dh1.11bn for 2017, compared with a loss of Dh485m a year earlier. The company began cutting costs last year as its losses widened and reorganised its business along three lines encompassing theme parks, family entertainment centres, and retail and hospitality.

The company's chief executive Mohamed Almulla said the 2017 loss was mainly due to a Dh478m "non-cash depreciation expense" and costs associated with its Dh4.2bn debt. Every year, the company records around Dh500m in depreciation charge for the project, Mr Ireland said.

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“The best measure to judge the business now is Ebitda, which is effectively our profit but excluding depreciation and interest,” said Mr Ireland.

DXBE, which received 2.3 million visitors last year, had initially counted on welcoming 6.7 million in 2017, but failure to achieve those targets has prompted the company to cut ticket prices, reduce costs and focus on the local market to drive growth. Mr Almulla said the target is to have 70 per cent of the business coming from local visitors and the rest from international visitors, with a focus on four source markets: UK, China, Russia and India.

“2017 is very much a ramp up year for us,” said Mr Ireland. “We are waiting for Q1 2018 to understand the trends,” he added, declining to give forecasts for visitor numbers for this year.

But Cairo-based investment bank EFG Hermes had forecast in January that visitor numbers could reach 3.5 million in 2018 and 4.1 million in 2019.

The company expects growth in 2019 with the opening of Legoland Hotel and the Dh2.6bn Six Flags theme park in the fourth quarter of that year.

DXBE is the owner of Dubai Parks and Resorts theme park destination, hotels and a retail and dining facility with an estimated Dh13.2bn in development costs.