Dubai World, the government-owned conglomerate, is set to use provisions of the emirate’s special bankruptcy law to ensure an orderly process in the restructuring of US$15 billion of debts.
A meeting of international bank creditors in London this week gave majority approval to the new refinancing scheme, which has been under discussion since April.
Voters representing two-thirds of the total value of loans supported the plan.
This gives Dubai World the authority to use Decree 57, the special law of 2010 that successfully eased the restructuring of $25bn worth of debt through creditor ranks. The new proposal seeks to extend the repayment of $10.5bn of debt due in 2018 for an extra four years. In exchange, a smaller chunk of $4.5bn maturing next year will be repaid early.
Dubai World has offered "sweeteners" in the form of higher interest rates and collateral of shares in DP World, the global port company it owns.
Decree 57 has been used to force recalcitrant creditors to accept terms in the past in bankruptcy cases. But it also sets out a “clear process” for resolving debt restructuring under a legal framework, said a Dubai World source who did not wish to be named.
“There is no suggestion of default here. This is a simple case of a good company managing its debt profile efficiently,” the source said.
Some of the debt has been bought by hedge funds and other “distressed debt” institutions, which have traditionally held out for better terms even when most creditors agree a restructuring.
Dubai World could also use the provisions of the British “scheme of arrangement”, which deals with corporate bankruptcy, but that would require more creditors to vote in favour of the terms before it triggered the schemes provisions.
Last month, the final piece in the jigsaw was put in place when DP World bought Jebel Ali Free Zone Authority from Dubai World, boosting the conglomerate’s cash position by $3.5bn and giving it the resources to make next year’s repayment early and in full, probably in the first quarter.
A meeting will be held in Dubai next week to give regional investors a chance to weigh up and vote on the proposals.
The US investment bank Blackstone has advised Dubai World on the restructuring.
fkane@thenational.ae
Follow The National's Business section on Twitter
