Drydocks World will treat all lenders equally in its US$2.2 billion (Dh8bn) restructuring, despite one of its creditors obtaining a high court judgement in the United Kingdom against the shipbuilder.
Monarch Alternative Capital, a hedge fund in the United States, last week won a $45.5 million case against Drydocks, which is owned by Dubai World, putting the shipbuilder and repair company's debt restructuring in jeopardy. Drydocks sought a restructuring of its debt in 2010, having overstretched itself with an overseas expansion. Three hedge funds, including Monarch, now own part of its debt.
"We are not going to pay anybody [early]," said Khamis Juma Buamim, the chairman of Drydocks World. "It's going to be part of the $2.2bn restructuring. We are treating all lenders the same. We cannot do something special to one party." Monarch declined to comment.
Mr Buamim said he did not expect the other two hedge funds that own Drydocks' debt to seek legal action in London, where Monarch obtained the court judgement. "I do not think there's a worry about whether they will sue," he said. "All lenders have heard what the company has on the table, including the hedge funds. It's in the benefit of all parties to agree to the restructuring and move on."
Last week, Arcapita, an investment bank based in Bahrain, filed for bankruptcy protection in the US after talks with hedge funds over its $1.1bn debt broke down. Drydocks' proposed new debt deal would enable it to pay off debt over the next five years.
While the Monarch court judgement is not enforceable in the UAE, Monarch could seek to obtain the money it is owed by claiming against Drydocks' assets in countries that have an enforcement treaty with the UK. Singapore, where Drydocks operates an 11-hectare shipyard, has such a treaty with the UK, but because the shipbuilder's subsidiary takes a different name - Drydocks World-Singapore Pte - the judgement might not be enforceable, according to lawyers.
Mr Buamim said Drydocks World was in good health after a difficult couple of years.
It made earnings of $125m before interest and tax last year, and Mr Buamim expects it to reach a similar level this year.
"It compares very positively," he said. "As we know, the business was suffering since 2008. We have seen a remarkable change in the space of one year."
Drydocks is seeking to restructure two bank loans that were issued in 2008, one valued at $1.7bn and the other at $500m.
The $1.7bn loan came due in October, and the $500m loan matures next year. A few weeks ago, Drydocks had injected optimism into the market for refinancing after announcing its restructuring had been all but completed, but the court judgement in London has cast a pall over that.
The shipbuilder is one of a number of Gulf and Dubai Government-related entities restructuring debts this year. Dubai's refinancing needs have been made more worrying, given the weakened lending environment globally linked to the euro-zone sovereign-debt crisis. Two of the largest debt deals maturing this year are the Jebel Ali Free Zone's $2bn Islamic bond, which is due in November, and a $1.25bn sukuk from DIFC Investments in June.
The IMF, Bank of America Merrill Lynch and ratings agencies estimate repayments or refinancings of about $15bn this year.
Dubai's total debt load after the Dubai World restructuring is $119.8bn, according to a Merrill report.
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