DXB Entertainments has announced that it is no longer progressing plans to build a Six Flags theme park in Dubai as a syndicated loan for the project is no longer available.
The company, which operates the Dubai Parks and Resorts cluster of theme parks, said in a statement on Wednesday evening that after launching a strategic review of its future plans in August, actions in the intervening period, "including formal notification by Six Flags, resulted in funders' concerns being raised specifically in relation to the revised projections for the Six Flags Dubai Project".
DXB Entertainments did not clarify details of the nature of the notification received from United States-based theme park operator Six Flags, and did not immediately respond to questions from Zawya to comment. Six Flags did not respond to requests for comment. In a statement covering its Q3 results in October, Six Flags told its investors that phase one of on the Dubai park "has had performance challenges" and that phase two was under review.
"While there can be no assurances as to the ultimate outcome of the evaluation, our partner is current on all of their financial obligations to us," the company said in its earnings statement.
DXB Entertainments initially announced proposals for a 2.67 billion United Arab Emirates dirhams ($735.2 million) Six Flags Dubai in 2016. The park was to contain a total of 27 rides and its initial targeted opening date was the fourth quarter of this year.
In April 2016, the company announced that it had raised 993 million dirhams via a debt facility from Abu Dhabi Commercial Bank, Dubai Islamic Bank and Sharjah Islamic Bank to help fund the park's construction. One month later, in May 2016, it raised a further 1.68 billion dirhams, tapping investors via a rights issue which was 1.25 times' oversubscribed. Ghantoot Road Contracting was appointed as the park's main contractor and work started on site in July 2016.
However, since the first phase of Dubai Parks and Resorts opened in late 2016 visitor numbers have been substantially below forecasts and the current theme parks on the site - motiongate, Legoland and Bollywood Parks - have not generated enough income to cover costs. The company had initially projected around 6.7 million visitors per year, but last month it said that visitor numbers for 2018 - its second full year of operations - were just below 2.8 million.
Despite cost-cutting efforts, the park has continued to lose money. In the first nine months of 2018, DXB Entertainments declared a loss of 733.5 million dirhams, bringing the company's accumulated losses to date to nearly 2.49 billion dirhams.
In a conference call in November, the company said it was "weighing up all feasible options" for Six Flags Dubai as part of its strategic review.
Ayub Ansari, an analyst at investment bank SICO, said that the decision not to proceed with Six Flags Dubai made sense, said that given the fact DXB Entertainments had already completed a rights issue to fund Six Flags, "delay/suspension in the project will add to the value erosion for DXBE shareholders", in a telephone interview with Zawya on Thursday morning.
However, he added that he was "not really surprised at the decision".
"The company is still struggling to achieve meaningful growth in park footfall numbers at its existing operations – 4Q18 park arrivals were up by just 3% YoY (year--on-year). "Opening of a new park would have added to the fixed costs and accelerated cash burn," he said.
"Further, (the) overall business environment for theme parks is challenging given the slowdown in Dubai tourist arrivals, weak discretionary spending of the resident population and rising competitive intensity with the opening of Warner Bros theme park in Abu Dhabi last year."
(Reporting by Michael Fahy; Editing by Mily Chakrabarty)
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