Dubai World believes it may have to make use of a special tribunal set up by the Government to bring some creditors on board to its settlement offer, according to advisers close to the company. The property conglomerate announced on Thursday that it had clinched a deal on debt repayment with creditors that would speed up the emirate's recovery.
The deal includes extending the repayment period on loans to between five and eight years. Most creditors will receive only 1 per cent annual interest. The final repayments are being guaranteed by the Dubai Government. Seven banks representing 60 per cent of the conglomerate's total borrowings of US$14.4 billion (Dh52.89bn) are in favour of the Dubai World proposals. But there are still more than 80 lenders to the group and its developer Nakheel, which have to give the deal the go-ahead.
"We believe some kind of tribunal process is inevitable," said one Dubai World adviser. "The purpose of the tribunal is to protect the majority from the minority and to prevent smaller parties from wrecking the deal." Aidan Birkett, the chief restructuring officer of Dubai World, said: "We want a consensual deal, of course. If we get to a level of acceptance of say, 80 per cent of value, I'm sure some of those creditors will ask us to use the tribunal process to get a deal."
The tribunal was set up last November by Decree 57 of the Dubai Government, as the final sanction available to Dubai World in its "stick and carrot" approach to the negotiations with creditors. So far, only one case has been brought under tribunal auspices, by an Egyptian former employee of a subsidiary seeking payment of money she claims is owed to her by Limitless, a Dubai World subsidiary. Lawyers in Dubai believe the threat of tribunal proceedings had a significant influence in shaping the deal, and may persuade other banks to fall in line.
Jawad Ali, a managing partner of the international law firm King and Spalding, said: "The decree pursuant to which the Dubai World tribunal was established made this deal possible. The tribunal has the right to drag the remaining 40 per cent to sign the deal if the judges deem it to be in the best interest of the company and the creditors. "The fact that they now have 60 per cent is very good news. Sixty per cent is quite sufficient. The tribunal has the power to drag the dissenting lenders to agree to this plan.
"The banks would not have consented to this announcement unless they felt comfortable that the rest of the lenders would either consent voluntarily, or if not, would be dragged into it because they believe that there is already a sufficient majority." fkane@thenational.ae uharnischfeger@thenational.ae
