We are approaching endgame in the negotiations between financial creditors, who are owed US$14.4 billion (Dh52.89bn), and Dubai World. But there is many a slip twixt cup and lip and this saga, which has been running since last November when Dubai World first called in the restructurers, still has the capacity to surprise. So far, after the confusion of the initial restructuring announcement, it has gone pretty smoothly. Other restructurings in the region have been far more time-consuming and confrontational. The Investment Dar in Kuwait is still locked in legal wranglings with a rump of dissident creditors; Global Investment House also had a tough time persuading creditors to accept reduced terms.
Dubai World managed to put together a proposal by the end of March and got agreement on it from the seven banks that make up 60 per cent of the lending last month. That's good progress, given the size of the debts and the number of banks involved. The company says its financial debt is held by 73 banks, including the seven members of the co-ordinating committee (CoCom) that have gone for the deal. That means there are 66 financial institutions still to be won round, largely in Europe, the Middle East and Asia (American banks did not join the Dubai World lending club to any significant degree, it seems).
The motives of the 66 will be varied and influenced by individual circumstances. The credit manager of a small bank in southern India, for example, might take the view that his couple of million dollars on loan to Dubai World is not worth fighting about and accept the terms on offer. His counterpart in Europe, on the other hand, is going through his own debt crisis and may decide that every cent counts in the current situation. His bank may be more likely to fall into the ranks of dissidents that are still not accepting the deal recommended by the CoCom.
Some analysts have said the process of trying to win potential dissidents over to Dubai World and the CoCom's way of thinking resembles an old-fashioned English sheepdog trial. Each CoCom member has his own flock of banks to tend with the aim of getting them into a pen marked "accept the deal". Of course, there is always one errant animal that strays but the poor brute is usually persuaded, cajoled and threatened into the pen in the end. This is what Dubai World and its advisers hope will be the case with the 66.
The creditors have one option that is not open to the sheep: they can get out of the field altogether by selling their debt. This has already happened in at least one case, as was reported this week, with a $25 million tranche sold at 55 per cent of face value. This was a pretty good deal by all accounts, as experts in the second-hand debt business reckon between 40 and 50 per cent is a more realistic value for any future transactions.
Will there be more sellers? There could be, with a variety of motives. On the one hand, they could be so outraged by the low coupon on offer in the Dubai World proposals, 2 per cent at best, and the long payback time, up to eight years, that they sell in protest. On the other hand, they could be under such credit pressure themselves that they just want to pull in some cash, even though they are taking a big hit.
The buyers' motives are more mysterious. They might be serious long-term investors taking a bet that Dubai will come good and that their investment will pay off over the years. But they are just as likely to be arbitrageurs and hedge funds that believe they can tweak a bit more out of Dubai World. These professional debt-dealers are likely to meet a stone wall of refusal from Dubai World. The company and the CoCom of creditors have quite a formidable arsenal of weapons at their disposal to deal with dissidents.
Creditors could go for a "buyout", for example, where those banks in favour of the deal simply buy the debt from the doubters in a series of private transactions. Maybe the $25m transaction reported earlier this week was a "buyout" deal: we are unlikely ever to know for sure. The other option is a "squeeze-out" in which the non-approving banks are forced by legal process to accept the terms. This is happening in Kuwait at the moment with The Investment Dar and is made all the easier in Dubai by Decree 57, the law that set up a special tribunal at the Dubai International Financial Centre. When Dubai World gets approval from bankers representing more than 66 per cent of its debt, it could begin this process.
Finally, there is the "nuclear option" that the bankers call a "re-doc". In this scenario, approving creditors would simply freeze out the dissidents and issue new documentation (re-doc) to refinance the debt. The hold-outs might claim default on the original debt contract but this would not be recognised by the approving creditors or the company. A re-doc is the ultimate cold-shoulder from the international banking community.
Any one, or none, of these tactics might be used in the Dubai World situation. We will have a much better idea of the level of dissidents by the time an all-bank meeting is held, probably in Dubai but maybe in London, some time in the next few weeks.
fkane@thenational.ae
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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