Dubai World in talks on settlement proposals

The chief restructuring officer of Dubai World, met conglomerate's bankers in London to outline proposals for settlement of its US$22 billion (Dh80.80bn) of debt to those lenders.

Nakheel issued Islamic bonds.

Aidan Birkett, the chief restructuring officer of Dubai World, met the conglomerate's bankers in London yesterday to outline proposals for settlement of its US$22 billion (Dh80.80bn) of debt to those lenders. Mr Birkett held talks with HSBC, one of the leading creditors to Dubai World and a member of the co-ordinating committee ("cocom") for the 90-plus banks to which Dubai World owes money. Talks with other cocom members, including the committee's chairman, Royal Bank of Scotland, are also planned.

His visit came as speculation grew that Dubai World was near to finalising a series of proposals to creditors. These could involve offers of between 60 and 100 per cent repayment, depending on the length of time creditors would agree to roll over their loans. According to one unconfirmed suggestion, creditors could receive payment in full if they agreed to a new repayment schedule over 10 years and accepted assets in Nakheel, the indebted developer of Dubai's Palm projects.

A spokesman for Dubai World declined to comment on these suggestions, as did a spokeswoman for the Dubai Financial Support Fund, which is still injecting cash into those parts of Dubai World subject to the restructuring proposal. Firm proposals have been promised by the end of the month, but could be ready before then. One adviser suggested formal proposals might surface in the next 10 days. Other cocom members, including two UAE banks, Emirates NBD and Abu Dhabi Commercial Bank, are not so far involved in the current round of talks.

Local banks are estimated by the ratings agency Moody's to account for some $15bn of Dubai World's total debts and liabilities of $59bn. Banking sources said there was the possibility of a split in the creditors' ranks between the big global groups, local Gulf institutions, and other small to middle-ranking international banks. Speculation surrounding the London meetings helped raise the price of Islamic bonds issued by Nakheel and lowered the cost of insuring against the default of Dubai debt. Sources at Dubai World also told Bloomberg yesterday that loans would be rolled over as they came due.

Five-year credit default swaps for Dubai fell by two-tenths of a percentage point to 4.87 per cent, their lowest level since January 28, according to the information specialist CMA DataVision. Credit default swaps measure the cost of insuring against default on debt, and declines mean investors are less worried about a company or government's financial condition. Meanwhile, the price of an Islamic bond issued by Nakheel rose by 2 per cent yesterday in Dubai, and stocks on the Dubai Financial Market rose by 1.6 per cent to their highest level in more than three weeks following the news.

"Having some clarity around the subject is definitely supportive of the markets," said Jamil Hallak, the head of credit trading at Standard Chartered in Dubai. @Email:[e-mail]