Dubai World chairman optimistic on $15bn debt restructuring talks

It is believed at least two-thirds of creditors gave their approval to a new deal, which has been under discussion since April.
Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai World. Jaime Puebla / The National
Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai World. Jaime Puebla / The National

Sheikh Ahmed Al Maktoum, the chairman of Dubai World, is “very optimistic” that the conglomerate will strike a deal with creditors over US$15 billion worth of debt that is being restructured in long-running talks with more than 100 banks and financial institutions.

He was speaking on the sidelines of a conference in the emirate, as creditors met separately to discuss terms offered by Dubai World to extend repayment deadlines in exchange for improved terms and collateral.

Although there was no official announcement from Dubai World, it is believed at least two-thirds of creditors gave approval to the new deal, which has been under discussion since April.

Sheikh Ahmed said there would be an announcement about the deal “at the right time”, but added: “I am very optimistic. It’s very positive and you will hear about it. I think Dubai has no issue with raising debt. I think you have seen it with many Dubai companies today from the airline side and the private side. There is no problem going to the market.”

Creditors at the Dubai meeting, at the beachside Ritz- Carlton hotel, effectively rubber-stamped a formula agreed last week at a similar meeting in London.

Under the terms of the new deal, Dubai World will repay early and in full a $4.5bn chunk of debt that matures in September next year, and in return will get a four year extension on $10.5bn of debt due in 2018.

Dubai World has “sweetened” the deal by offering collateral to creditors in the shape of shares in DP World, the global ports company it owns, and better interest terms.

The deal is complicated by the presence of many “distressed debt” investors as Dubai World creditors. These institutions often hold out for better terms than offered to bank creditors.

But Dubai World has the option – with more than two-thirds approval – to use the provisions of Decree 57, the special bankruptcy legislation brought in when Dubai World agreed terms over $25bn of debts in 2010. This could force recalcitrant creditors into line behind the majority.

The company could also use British bankruptcy legislation – the “scheme of arrangement” – to force hold-outs into line.

However, after the formal meeting closed it emerged that two big creditors – British banks Royal Bank of Scotland and Lloyds TSB – had doubts about the deal.

Debt market traders said that both had been keen to sell their debt in Dubai World earlier this year, and were not likely to be locked into a long-term deal.

The two banks account for about 10 per cent of the total $15bn, debt market sources said, and have come under pressure from the UK government, which owns big stakes in them, to withdraw from what it regards as superfluous icommitments.

But with two-thirds acceptance, opposition from RBS and Lloyds would not appear a serious obstacle to the overall deal.

fkane@thenational.ae

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Published: December 8, 2014 04:00 AM

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